India Macro Weekly: Inflation hardens, activity picks up, RBI hits policy pause

For the week ended August 13, 2016:

  • A number of key indicators were released, which, put together point to a mixed picture for the Indian economy. Inflation based on Consumer Price Index (CPI) breached 6% to wind up at 6.07% on a year on year (yoy) basis in July 2016, led by rising food prices.
  • With a consistent buildup in inflation over the past few months, the RBI kept key rates and ratios unchanged in its latest monetary policy meeting.  In fact, the bank now expects an upside risk to its 5% inflation target for March 2017.
  • On the real activity front, the index of industrial production (IIP) grew by 2.1% in June 2016, reaching an 8 month high.
  • While the actual growth level remains quite muted, the fine print as well as RBI’s latest survey on industrial outlook give room for optimism. 
  • Continued plentiful rains continue to bode well for the Kharif crop, since the area under coverage has been steadily increasing compared to the past year.
  • Foreign trade numbers disappointed in July 2016, as both merchandise exports and imports contracted.  This was a particularly disappointing reading, since exports had shown the first signs of a turnaround during June 2015.
  • The  GBP continued to reel under the Brexit aftereffects, as it depreciated by a whole 1.7% against the rupee in the past week even as USD and EUR showed muted trends. 
 This summary is part of our weekly subscription based report – India Macro Weekly. To know about the subscription details, please write in at and we will respond to you as soon as we can.

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