CPI For October 2012 At 9.75 Per Cent

The Consumer Price Index (CPI) inflation for the month of October 2012 came in marginally higher by 2 basis points to 9.75 per cent on a YoY basis. The same goes on a sequential basis as well for the month of September 2012. The CPI stood at 9.73 per cent. Provisional figures suggested that inflation in rural area increased while in urban areas it saw some kind of cooling off. The rural area inflation increased by 19 basis points to 9.98 per cent while for the urban area the trend is opposite as the same has seen contraction of 26 basis points to 9.46 per cent.

Sugar was a major consumable commodity item which saw a huge surge in its price on a YoY basis. The price of sugar surged almost by 19.61 per cent from last October to this October. The prices of other consumable items like pulses and products (increased by 14.89 per cent), egg, fish and meat (12.18 per cent), cereals and products (increased by 11.82 per cent).

Meanwhile, we also had the IIP numbers for the month of September 2012 released, which had largely disappointed the streets. The IIP for September came in at -0.4 per cent against the street expectation of around 3 per cent.

With growth coming in on the lower side while inflation showing signs of consolidating, should one expect a rate cut cut in the RBI’s next monetary meet? We at DSIJ believe that though inflation numbers are showing signs of consolidating, there is still a chance that the same might move northwards for the month of November 2012. This could be due to the festive season where consumers’ disposable increases.

The Reserve Bank of India (RBI) also had guided that inflation in the immediate short run may move higher from the March quarter of 2012 but may gradually contract and come down. And hence one should not have high expectations from the RBI to slash its key rates in the month of December 2012. However, one may see some positive action from the apex bank in early 2013.