Unexpected duo data unlikely to change RBI policy in February 2023 By Nikhil Gupta, Motilal Oswal Financial Services Limited
Below the perspective on CPI and IIP Data by Mr. Nikhil Gupta, Chief Economist, MOFSL group.
Unexpected duo data unlikely to change RBI policy in Feb'23
-- Today's data were totally unexpected. Headline CPI-inflation was much lower than consensus in Nov'22 though IIP declined sharply in Oct'22.
-- Notably though, the entire positive surprise in CPI was due to food inflation (down to 11-month low of 4.7% YoY), as core inflation inched up to 6.3% YoY from 6.2% last month. Services inflation was largely intact at 5.5% and the CPI basket with 6%+ inflation increased to 56.2% from 54.7% in the last two months.
-- Separately, IIP contracted 4% YoY in Oct'22, faster than BMBG consensus of -1%. It was revised up to 3.6% (from 3.1% reported earlier) in Sep'22.
-- Overall, the combination of lower inflation and weaker growth is likely to persist in CY23, though the magnitude of fall (in both) was surprising today. Since IIP is a key input in quarterly GDP estimates, it imparts downward bias in 3Q GDP growth. At the same time, details of CPI are not so encouraging.
Thus, we maintain a 25bp rate hike in Feb'23 by the RBI.
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