Feb-21 CPI picks up in line with expectations; IIP contracts surprisingly in Jan-21 By Mr. Nikhil Gupta, Chief Economist at Motilal Oswal
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Below are Views On CPI and IIP numbers By Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd
“Feb-21 CPI picks up in line with expectations; IIP contracts surprisingly in Jan-21
Don't expect any change in MPC's stance or policy rates next month
-- Headline CPI inflation inched up from 4.1% YoY in Jan-21 to 5% YoY last month, in line with the market consensus (and our expectations). Details, however, suggest that food inflation was slower than projected (3.9% vs. 4.2%) and core inflation was higher (5.6% vs. 5.4%).
-- Separately, the index of industrial production (IIP) declined unexpectedly by 1.6% YoY in Jan-21, following a growth of 1.6% in Dec-20 and in stark contrast to the market consensus (and our exp.) of +1%. The entire decline was led by the manufacturing sector, which saw broad-based worsening (more than two-third components declined). Capital goods ane consumer goods declined again, while other industries (basic, intermediate and infra) posted marginal growth in Jan-21.
-- Overall, the pick-up in inflation and fall in IIP is the worst possible combination. We hope IIP would come back into growth territory from Feb-21, though CPI may pick up further to ~5.4% in Mar-21. Accordingly, we expect MPC to maintain status quo in April's policy.”
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