India inflation seen cooling in January, output eases | Reuters

By Krishna Eluri | BENGALURU BENGALURU Indian inflation likely cooled in January to the lowest in at least five years, after food prices fell and demand weakened following Prime Minister Narendra Modi's ban on high-value currency notes, a Reuters poll predicted.Consumer price inflation has been below 4 percent since Modi's Nov. 8 decision to abolish 500- and 1,000- rupee notes wiped out 86 percent of the currency in circulation, hurting demand in India's largely cash-based economy.The January inflation rate is due to released at 1200 GMT on Feb. 13.According to the poll of 26 economists, the inflation rate for January slowed to 3.22 percent in January, which would be the lowest in the index's five-year history, from 3.41 percent in December.

Reuters February 09, 2017 22:22:52 IST
India inflation seen cooling in January, output eases
| Reuters

India inflation seen cooling in January output eases
 Reuters

By Krishna Eluri
| BENGALURU

BENGALURU Indian inflation likely cooled in January to the lowest in at least five years, after food prices fell and demand weakened following Prime Minister Narendra Modi's ban on high-value currency notes, a Reuters poll predicted.Consumer price inflation has been below 4 percent since Modi's Nov. 8 decision to abolish 500- and 1,000- rupee notes wiped out 86 percent of the currency in circulation, hurting demand in India's largely cash-based economy.The January inflation rate is due to released at 1200 GMT on Feb. 13.According to the poll of 26 economists, the inflation rate for January slowed to 3.22 percent in January, which would be the lowest in the index's five-year history, from 3.41 percent in December. "The cash squeeze played a role in the faster decline in prices of perishables and pulses, which is suppressing the headline inflation," said Abhishek Upadhyay, economist at ICICI Securities."Core inflation continues to remain stable closer to 5 percent," he said.

The median consensus for January consumer inflation is well below the Reserve Bank of India's target of 5 percent by end-March 2017 and medium-term target of 4 percent, and would seem to provide ample room for a rate cut.India's central bank was expected to make a 25 basis points cut in the policy repo rate on Wednesday to counter the effects of the currency ban and help revive demand.But in a surprise move, the RBI's Monetary Policy Committee held the rate at 6.25 percent and changed its stance to "neutral" from "accommodative", citing risks of high inflation.

Upadhyay said the key takeaway from the meeting is that the RBI is "looking at underlying areas of inflation rather than perishables". The government's demonetisation drive has had a significant impact on the Indian economy, with both manufacturing and services activities contracting in December, the month after the move was announced.While factory activity returned to modest growth in January, services, which constitutes around 60 percent of India's gross domestic product, contracted for a third month, according to the purchasing managers' indexes from Nikkei/IHS Markit.

The Reuters poll also showed that Industrial output growth slowed to 1.1 percent in December from 5.7 percent in November.The reduced pace is "primarily on account of a slowdown in the growth momentum of consumption goods sector. Auto sales were at their 16-year low in December," Rupa Rege Nitsure, group chief economist at L&T Financial Services, wrote in a note. Wholesale price inflation is expected to have picked up last month to 3.89 percent from 3.39 percent in December. (Polling by Shaloo Shrivastava and Khushboo Mittal; Editing by Richard Borsuk)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

Goods train runs over two persons crossing railway line in Mathura
India

Goods train runs over two persons crossing railway line in Mathura

Both were trying to free their motorcycle from the rail track when the accident occured, SP (City) Martand Prakash Singh said

Cryptocurrency prices tumble and exchange trading falters as snags crop up
News & Analysis

Cryptocurrency prices tumble and exchange trading falters as snags crop up

NEW YORK (Reuters) -The price of cryptocurrencies plunged and crypto trading was delayed on Tuesday, a day in which El Salvador ran into snags as the first country to adopt bitcoin as legal tender. Shares of blockchain-related firms also fell as crypto stocks were hit by trading platform outages. But the major focus was on El Salvador, where the government had to temporarily unplug a digital wallet to cope with demand.

Ford poaches Apple's car project chief Doug Field
News & Analysis

Ford poaches Apple's car project chief Doug Field

By Joseph White and Sanjana Shivdas (Reuters) -The head of Apple Inc's car project, Doug Field, is going to work for Ford Motor Co to lead the automaker's advanced technology and embedded systems efforts, a hiring coup for Ford Chief Executive Jim Farley.