Expert views: April inflation accelerates to 7.23%

Larsen & Toubro has given a guidance of 15-20 per cent growth in order book for 2012-13.

NDTV Profit Desk

14 May 2012, 12:51 PM IST

Honda India president Keita Muramatsu (left) and actor Akshay Kumar at the Dream Yuga launch in Gurgaon on Tuesday.

India's wholesale price index (WPI) rose a faster-than-expected 7.23 per cent in April from a year earlier, mainly driven by higher food prices and manufactured items, government data showed on Monday.

Analysts on average had expected an annual rise of 6.91 per cent, a Reuters poll showed. Wholesale prices rose 6.89 per cent in March.

The annual reading for February was upwardly revised to 7.36 per cent from 6.95 per cent, the government said in the release.

COMMENTARY

JONATHAN CAVENAGH, FX STRATEGIST, WESTPAC, SINGAPORE

"Not a good data print for India at all, particularly coupled with last week's very weak IIP (index of industrial production) print. Still elevated inflation pressures, combined with softening real activity will re-ignite stagflation fears. RBI (Reserve Bank of India) will have a battle on its hands to keep a lid on USD/INR."

LEIF ESKESEN, CHIEF ECONOMIST FOR INDIA AND ASEAN, HSBC, SINGAPORE

"Today's number underscores the point that the Reserve Bank of India has limited room to cut monetary policy rates because it highlights the risks that inflation poses.

"The inflation is more structural in nature, and if the RBI eases rates too much, inflation could flare up."

A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI

"Though the number is higher than expected, one saving grace is most of the sharp rise is limited to primary articles and not core inflation. We are not yet revising our inflation view of 7 per cent March-end (2013) since it is mostly on the primary side, we don't think this will be a permanent impact."

RAJEEV MALIK, ECONOMIST, CLSA, SINGAPORE

"The data should result in soul-searching at the Reserve Bank of India for having delivered the unnecessarily bigger-than-expected rate cut last month."

BACKGROUND

- A weakening rupee, which has shed more than 8 per cent since March, is putting pressure on prices of imported items such as edible oil, machinery and oil.

- The RBI cut interest rates in April for the first time in three years by an unexpectedly sharp 0.50 per cent or 50 basis points to give a boost to sagging economic growth, but warned that there is limited scope for further rate cuts.

- High food inflation is likely to remain at least until July as fruit and vegetable output shrink during the summer season.

- Industrial output unexpectedly contracted in March for the first time in five months, hit by weak investment and global demand.

- Economic growth slowed to 6.1 per cent in the December quarter, and is forecast to dip below 7 per cent for the first time in three years in 2011/12.