Rising Inflation in India but still below target

Inflation in India increased slightly in January but still below the target of the central bank for six consecutive months as forecasted by Reuters poll that also aligns with the anticipated action by policymakers to reduce rates.

On Thursday, the central bank of India adjusted lower the interest rate by 25 basis points, surprising investors in order to stimulate growth amid the stagnant inflation.

Although a rise in inflation is anticipated, the growth will probably remain dull in the background of subdued demand. This would also allow the central bank for another cut, shared by an economist at IBM, Shashank Mendiratta.

According to head of economics and strategy for Asia at Mizuho Bank, Vishnu Varathan, “The disinflation from food and fuel are probably going to start fading, we don’t anticipate inflation to drag from these factors,”  Inflation will probably return to normal ranging in 3-4 percent range by the middle of this year, he added.

However, even if the core inflation has gotten closer to 6 percent, there is still a gap in the headline data which will likely have a big impact on the monetary policy of the Reserve Bank of India.