Macroeconomic Forecast India

Headline wholesale price inflation (WPI) held steady at 9.7% y-o-y in October. While primary articles inflation fell to 11.4% y-o-y (from 11.8% in September), fuel and power inflation ticked up to 14.8% y-o-y (from 14.1%). Meanwhile, manufactures inflation remained at 7.7% y-o-y. We maintain our view for disinflation as money supply growth continues to demonstrate weakness, suggesting that this stubborn spate of inflation is nearing its end. Indeed, monthly inflationary momentum appears to be waning. The latest figure poses upside risk to our end-FY2011/12 (Apri-March) WPI forecast of 8.5%.

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