CPI, IIP numbers to be release today; Here's what you can expect

India's two key macroeconomic factors namely Consumer Price Index (CPI) inflation and Index of Industrial Production (IIP) numbers will be released on Wednesday.

Ahead of the release, Sensex was trading at 29,626.87 down 161 points or 0.54%, while Nifty 50 was trading at 9,181.20 below 55.80 points or 0.60%.

Ministry of Statistics and Programme Implementation (MOSPI) will release IIP numbers for February 2017 and CPI Inflation for March 2017.

Here's what you can expect.

CPI Inflation:

A Reuters poll found, “India's inflation is seen climbing to within touching distance of the Reserve Bank of India`s (RBI) 4% medium-term target in March, driven by higher food costs.”

As per MOSPI, CPI inflation rose for the first time in seven months to 3.65% in February 2017, compared to 3.17% of January 2017.

source: tradingeconomics.com

The key reason was due to moderate increase in prices of fruits (8.3%) sugar (18.8%) and pan, tobacco (6.2%).

One key achievement in February month, was the sequential drop in core inflation to 4.8% year-on-year from 5% earlier, as this area has been a cause of concern for RBI.

Nikhil Gupta, Madhurmi Chowdary analysts at Motilal Oswal said, “It implies that CPI inflation averaged 4.6% in FY17 YTD (until February), as against 4.9% in the year-ago period. We expect headline inflation to remain below 4% in March too, implying inflation at 4.5% in FY17, lower than 4.9% in FY16.”

ICRA expects the CPI inflation to rise to above 4.5% in March 2017, as the base effect continues to unwind and prices of perishables track a seasonal uptrend, while remaining below the RBI’s forecast of 5%.

Indicating risk further over inflation, RBI surprised investors in its first monetary policy for FY18, by increasing reverse repo rate by 25 basis points to 6% from 5.75%. The central bank kept policy rate unchanged at 6.25%. 

Also Read: RBI monetary policy: What does a 0.25% hike in reverse repo rate mean

RBI expects headline CPI inflation to undershoot the target of 5% for Q4 of 2016-17 in view of the sub-4 per cent readings for January and February. For 2017-18, inflation is projected to average 4.5% in the first half of the year and 5% in the second half.

Also Read: Inflation is likely to play spoilsport at RBI’s rate cut party

IIP numbers: 

After contracting to a four-month low of 0.4% in December, the IIP numbers reversed the negative growth and stood at 2.74% in January 2017 aided by positive growth in manufacturing sector and favorable base effect.

source: tradingeconomics.com

Motilal said, "Going forward, as the economy is re-monetized, we expect industrial activities to stabilize. Accordingly, we expect IIP to grow 2% in February 2017 and 3% in March 2017, implying full-year growth of 1% in FY17, compared with 2.4% in FY16."

ICRA said, "Available indicators for February 2017 continue to paint a mixed picture, with narrowing contraction of auto production, improved coal output growth and a YoY dip in electricity generation."

Outlook ahead for IIP is robust, as per 77th round of RBI's  industrial outlook survey, it is indicated that overall business sentiment is expected to improve in Q1 of 2017-18 on the back of a sharp pick up in both domestic and external demand.