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Expert views on March inflation data

India's wholesale price index (WPI) rose a faster-than-expected 6.89% in March from a year earlier, mainly driven by higher food prices, government data showed on Monday.

April 16, 2012 / 12:08 PM IST

India's wholesale price index (WPI) rose a faster-than-expected 6.89% in March from a year earlier, mainly driven by higher food prices, government data showed on Monday.


Analysts on average had expected an annual rise of 6.70%, a Reuters poll showed. Wholesale prices rose 6.95% in February.


COMMENTARY:


A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI


"Headline number looks bad, but manufacturing is below our expectation which means that the problem is on the primary (articles) side.


"For the RBI what should really matter is the manufacturing number as policy rates act on the demand side, so we think RBI will cut rates. But they will remain cautious in whole of 2012-13 as broadly we expect headline inflation to be at 7% given high food prices and core inflation at 6%."


BACKGROUND:


- The Reserve Bank of India is widely expected to cut its repo rate for the first time in three years on Tuesday in an attempt to lift sagging economic growth, even as high oil and food prices remain a challenge to managing inflation.


- High food inflation is likely to pinch Indians at least until July as fruit and vegetable output shrinks, while edible oil and pulses prices are rallying on lower production and a more expensive world market.


- Industrial production grew at a slower-than-expected pace in February, weighed down by a contraction in output of consumer durable goods.


- Car sales in India rose just 2.2% in the fiscal year ended March, on high interest rates and rising fuel costs, but are seen posting double-digit growth this year.


- India's trade deficit is seen widening to USD 185 billion in the 2011-12 fiscal year on higher crude import bill, which may worsen the country's current account balance and further weaken the rupee.


- Indian services sector growth slipped to a five-month low in March as optimism about the business outlook in the coming year faded to its weakest level since 2009.

- Economic growth slowed to 6.1% in the three months to December. The government has forecast growth in the fiscal year that ended on March 31 to dip below 7% for the first time in three years.

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