Moneycontrol
Sep 13, 2017 10:09 AM IST | Source: CNBC-TV18

Expect inflation to move up to 4.5%: Credit Suisse

In an interview to CNBC-TV18, Deepali Bhargava, Economist at Credit Suisse and Vivek Rajpal, Rates Strategist at Nomura India shared their reading and outlook about the same.

Retail inflation for August has quickened to 3.36 percent and India's factories are still struggling as industrial output in July grew by a mere 1.2 percent.

In an interview to CNBC-TV18, Deepali Bhargava, Economist at Credit Suisse and Vivek Rajpal, Rates Strategist at Nomura India shared their reading and outlook about the same.

Inflation was broadly in line but trends which are emerging are – firstly, when goods and services tax (GST) got implemented, we were looking at GST to add about 30 basis points (bps) to inflation and it has happened. Secondly, we were looking a Pay Commission to add about 50 bps to inflation, said Bhargava.

Broad view remains that inflation is on the upside, we have inflation moving up to about 4.5 percent in Q1 of 2018 and we are sticking to that view, she added.

Index of industrial production (IIP) numbers, she said, is disappointing. We have revised gross domestic product (GDP) lower to 6.6 percent for the current year, she further mentioned.

She expects Q2 gross value added (GVA) at 6 percent owing to pick-up in private consumption.

Expect exports to aid growth going ahead, Bhargava said.

Inflation data was not so supportive of the bond market, so we may see some upward pressure in yield. It should have a minor impact, Vivek Rajpal of Nomura India told CNBC-TV18.

Market not pricing any further possibilities of monetary easing, Rajpal added.

Rajpal expects 10-year bond yield to stabilise at 6.6 percent.

For entire discussion, watch accompanying video...
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