Economists at Commerzbznka analyze Indian economic outlook after inflation and growth data.
Stable inflation, continued expansion
February headline inflation in India held steady at 5.1% YoY. Encouragingly, core inflation, which excludes food and energy, moderated further to 3.3% YoY. Headline inflation may tick up in the coming months due to higher food prices from the warm weather and seasonal factors. However, it is still expected to remain within RBI’s 2-6% target range.
On the growth front, there were few signs of a slowdown in domestic demand. Production of consumer durables expanded by nearly 11% YoY in January. Overall, it appears the economy remains in a sweet spot.
The near-term outlook remains positive while underlying inflation remains well anchored. This should see RBI keep rates on hold at 6.50% for the foreseeable future. They do not need to act ahead of the Fed’s next move.
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