Inflation Correction in Second Half of FY17 Will Keep It at Moderate Levels
Standard Chartered expects moderate inflation in the second half of the ongoing fiscal. "We expect Indias CPI inflation to moderate over the course of year ending March 2017, slowing to 5 per cent y-o-y in the second half from 5.7 per cent in first half," it said in a note.
This headline inflation has been pegged at 5.3 percent for 2016-17 if rental allowances go up in the 7th Pay Commission the headline inflation could shoot up to 6%. However it also added that "Such a rise is unlikely to raise concerns, as the RBI has indicated that it will look beyond this technical boost to inflation.” The headline inflation rose to 5.4 per cent in April, dashing hopes of a rate cut by the RBI. The RBI is targeting to get it down to 5 per cent by early 2017.
Likewise the other factors which have kept the inflation in check are the oil prices and the food prices. Given the dependence of the Indian Economy on oil imports it has the influence, clout and muscle power to restrain all the sectors from registering a positive growth. Unless there is a further dip in the oil and food prices, inflation will stay at 5.3 percent.