India’s annual Consumer Price Index (CPI) inflation for May fell to 2.18% from 2.99% in April, moving towards the lower limit of the 2.0 to 3.5 % range forecasted by the RBI for the first half of the current Fiscal Year. “Thus, the April reading has imparted considerable uncertainty to the evolving inflation trajectory, especially for the near months. If the configurations evident in April are sustained, then absent policy interventions, headline inflation is projected in the range of 2.0-3.5% in the first half of the year and 3.5-4.5% in the second half,” RBI said. However, in its latest monetary policy review, RBI said the easing of inflation, excluding food and fuel, may be transient. The annual Index of Industrial Production (IIP) for April rose 3.1% from 2.7% in March. Recently, the government had changed the base year for IIP calculation to 2011-2012 from the earlier 2004-2005. Wholesale Price Index (WPI) inflation for the month of May was down to 3.85% from 5.70% in April. “CPI Inflation will stay low till July, greater chance of it falling in May to a new low of 2.58%,” D.K. Joshi, chief economist of Crisil had said before the release of this data.
India’s oil demand bounced back in May, surging 5.4 per cent on the back of highest growth in petrol consumption in nine months and the fastest rise in diesel usage since November. Fuel consumption in May stood at 17.79 million tons as compared to 16.87 million tons in the same month a year back, according to the Oil Ministry’s Petroleum Planning and Analysis Cell. Demand for diesel, which accounts for about 40 per cent of total sales, expanded 8 per cent to 7.51 million tons. Petrol consumption was up 15.3 per cent at 2.4 million tons, the fastest since August. Cooking gas or LPG sales were up 11.6 per cent to 1.78 million tons while naphtha consumption was down 1.2 per cent to 1.07 million tons. Sales of bitumen, used for making roads, fell 6.9 per cent to 637,000 tons, while fuel oil use edged down 2 per cent to 597,000 tons in May. Petcoke consumption was up 5.2 per cent to 2 million tons. Oil demand had plunged 5.9 per cent in January, the most in 13 years, after the shock demonetisation of high-value currency notes in November. Demand fell 3.1 per cent in February and 0.7 per cent in March before rebounding in April.
India is poised to become the entrepreneurial engine of the world and lead in innovation and economic development thanks to the factors like its frugal development model and advantage of demographic dividend, Union minister Jayant Sinha said. He said the India made optimum use of resources and was extremely energy efficient. “India has a unique frugal development model that can be exemplary in the world. Also, we have 50 crore of young population, which is also the largest in the world. These two factors give us an advantage to lead the world in innovation and economic development,” the Union Minister of State for Civil Aviation said. He was speaking on ‘It’s India’s turn now’ as part of the lecture series ‘Reinventing India’ initiated by Pune International Centre (PIC) at MCCIA. Presenting the statistics about India’s growing economy, Sinha said, “India’s Gross Domestic Product (GDP) is currently growing at 7 to 8 per cent. If it is looked at in the context of purchasing power parity (PPP) India’s economy is worth 9.5 trillion dollars. In the next decade, it will contribute 11 trillion dollars to the world economy,” he said. According to Sinha, these statistics put India on par with many leading countries in the world, including the USA and China. “While achieving this development rate, we are using 25 per cent of the steel and cement of China’s total usage. We are using 78 per cent less carbon per unit and our debt to GDP is only 135 per cent as compared to China’s 282 per cent. This makes India the most frugal economy in the world. We make optimum use of resources and are extremely energy efficient. This unique development model helps us stand out in the world,” he said. He also said the Modi government was introducing reforms and have left behind the feudal dynastic nature of the Nehruvian government. “We have brought in the model of minimum government and maximum governance. This model has fostered a partnership between people and government. This will lead to broader, deeper and structured reforms,” Sinha said.
Retail inflation hit a record low of 2.18% in May, mainly as food inflation touched a fresh low of -1.05%, partly reflecting the crash in prices of farm items following a good harvest. With the real interest rate touching a 15-year high in 2016-17, the latest moderation in inflation (albeit aided by a favourable base effect) bolsters the case for a rate cut. It also brings to the fore the “plausible alternative macroeconomic assessment” put out by chief economic adviser Arvind Subramanian after the Reserve Bank of India’s monetary policy committee (MPC) decided to keep key policy rates unchanged last week: “(the RBI’s) inflation forecast errors have been large and systematically one-sided in overstating inflation”. He said not just headline CPI but even core inflation has dropped substantially in recent months. The data released on Monday showed core inflation, too, dropped from 4.5% in April to 4.3% in May, recording a broad-based slowdown sequentially, with even services such as education, health and housing showing moderation. It was as much as 4.9% in March. Last week, the RBI trimmed its inflation forecasts for 2017-18. It projected headline CPI inflation at 2-3.5% for the first half of 2017-18 and 3.5-4.5% in the second half. In the April policy review, however, the RBI had forecast retail inflation to average 4.5% in the first half of 2017-18 and 5% in the second half. Analysts say the latest downward revision suggests the RBI may be accommodative on the future course of rates in a bid to prop up growth. “Following the record harvests in 2016-17, the timely onset to the monsoon has eased concerns related to the trajectory of food inflation. However, the continued dip in reservoir levels, extent of revision in MSPs and stickiness in rural wages remain modest inflation risks,” said Aditi Nayar, principal economist at Icra. But, overall, the trajectory for food inflation is expected to be relatively benign in the first half of this fiscal, which may soften inflationary expectations going ahead, she added. The positive base effect for food inflation is expected to continue till July 2017.