Food inflation may linger despite good monsoon: India Ratings
Oct 15 2013 , Mumbai
Headline inflation, on y-o-y basis, increased to 6.5 per cent in September 2013 from 6.1 per cent a month ago, led by inflation in primary food products (18.4 per cent) and fuel and power (10.1 per cent).
Even the consumer price index based inflation for September 2013 escalated to 9.84 per cent as compared with 9.54 per cent in August 2013, India Ratings said in a report.
Wholesale inflation in September 2013 increased by 0.36 percentage points over August 2013. Fruits and vegetables, and crude petroleum contributed 71.2 per cent and 21.4 per cent, respectively, to the increase in wholesale inflation in September 2013.
Fruits and vegetables inflation increased to 49.1 per cent in September 2013 from 42.4 per cent in August 2013 and crude petroleum inflation increased to 6.1 per cent in September 2013 from a deflation of 2.5 per cent in August 2013.
Quoting no change in RBI policy stance, India Ratings said that reversal in inflation trajectory has reduced the Reserve Bank's elbow room to ease policy rates.
Currently, marginal standing facility (MSF) rate is the operational overnight lending rate for the RBI; India Ratings expects easing of MSF rate and hardening of repo rate in second quarter review of the Monetary Policy on October 29.
Over the next few quarters, the agency expects the spread between MSF and repo rate to revert to the normal 100 basis points.
On the liquidity front, however, some liquidity infusion measures to correct the inverted yield curve are highly likely. Also, the introduction of innovative financial instruments over the next two quarters cannot be ruled out, the report said.