India Econ Flash
Friday Factsheet
Introducing a quick update on key data items that are out each Friday
? Inflation now in double-digits – up 11.05%: The government’s worst
nightmare has come true with inflation touching 11.05% for the week ending Jun
7 v/s 8.75% last week and 4.28% a year ago. While this week’s data incorporates
the effect of the fuel price hike (auto-fuels by 10%-15% and cooking fuels by
17%), the headline was expected to be close to ~10% levels. Besides the fuel
price increase, the uptrend seen in basic metals and iron-ore since the last two
months continues up 20.7% and 41.6% respectively.
? Key Contributors to Inflation and Index Revisions: Primary articles were up
10.8%; manufactured products were up 9.1% while the fuel price index was up
16.25%. Of the headline 11.05% WPI number, 2.5% is attributed to primary
articles, 5.1% to manufacturing and 3.5% to the fuel index. As seen in the chart
below, upward revisions to the index continue with the April 12 data being
revised up from 7.33% to 7.95%
? Monetary Tightening to Continue: As mentioned in our latest Macroscope (see
https://www.citigroupgeo.com/pdf/SAP17431.pdf ) with inflation likely to remain
at elevated levels for the next few months and this being a pre-election year,
depending on liquidity conditions, we expect rates to be higher by 25-50bps with
the RBI likely to use a combination of CRR and repo/reverse hikes.
? Monsoons Update: Latest data released by the IMD indicates that on a
cumulative basis, rainfall from 1Jun- 18th June was 45% above normal; with 32
of the 36 districts experiencing excess/normal rainfall. A good monsoon should
help boost crop product ...