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Economy Jul 14, 2013

June WPI may be over 4.9%, predicts Barclays

New Delhi: India's headline inflation scheduled to come out tomorrow may be more than 4.9 per cent for the month of June, says global financial services firm Barclays.

The country's WPI inflation fell to 4.7 per cent in May, its lowest rate since October, 2009. The reading for the month of June is scheduled to come out on July 15.

Last week, the Consumer Price Inflation (CPI) rose 9.87 per cent year-on-year in June, up sharply from 9.3 per cent in May and this print poses some upside risks for the June WPI reading, Barclays said in a research note.

Reuters

Reuters

"The CPI print poses some upside risks to our WPI projection of 4.9 per cent for June, due on July 15," the report said.

Barclays said the fuel component of CPI should rise at the margin in coming months, as reduction in fuel subsidies and a weaker rupee get passed through into inflation.

On rate cuts, Barclays said: "The uncertainty regarding the near-term rupee trajectory and likely upward pressures on inflation in June have reduced the likelihood of RBI easing at its July policy meeting, in our opinion."

The central bank is scheduled to review the first quarter monetary policy on July 30.

The industry is demanding cut in key policy rate to boost economic activities. Industrial output contracted by 1.6 per cent in May on account of poor show by the manufacturing and mining sectors.

According to Barclays, though the consumer price inflation is currently hovering near double-digit levels (9.87 per cent in June), it is expected to fall to more acceptable levels in the coming months.

"With the bulk of the increase coming from volatile fruits and vegetable prices, CPI inflation can potentially come down in coming months, given that rainfall conditions are stabilising, which can normalise food prices," Barclays said.

PTI


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