December 13, 2014

CPI Inflation Update - November 2014ECONOMICRESEARCH

The headline CPI inflation (combined) for November 2014 was noted at 4.38% (y-o-y),softer than 5.52% (y-o-y) seen previous month. The reading came in line with in-houseexpectations and also the consensus expectation. The headline combined CPI moved up inNovember by 0.21% (m-o-m), as compared to a 0.14% (m-o-m) growth observed in October.The lower reading on headline inflation was primarily a factor of decline observed inprices of vegetables and transportation & communication but, was also aided by considerablepositive base effect.

The food index (combined) declined further by 0.1% (m-o-m) in November 2014, againsta fall of 0.3% observed previous month. The food inflation for November 2014 was thusnoted at 3.1%, a considerable fall from 5.6% seen in October 2014, aided by base effect.

The core CPI and the ex-food CPI noted an uptick of 0.2% (m-o-m) and 0.3% (m-o-m)respectively in November 2014. The CPI inflation ex-food was placed at 5.1% for November2014, down from 5.4% reading seen previous month. The core CPI inflation was noted at5.6% (y-o-y) for November 2014, down from 6.0% reading seen previous month.

The final reading on headline CPI for October (combined) remained unchanged over theprovisional estimate of 5.52%. The internals, however, showed downward revision inprices of oils & fats, egg, fish & meat, milk products, and condiments & spices.

In the rural areas for November 2014, vegetables (0.72%, m-o-m) showed the biggestdowntick followed by sugar (0.63%, m-o-m), household requisites (0.43%, m-o-m) andtransport & communication (0.36%, m-o-m). In rural areas, there were also significantupticks observed for fruits (0.76%, m-o-m), milk & products (0.69%, m-o-m), personalcare & effect (0.60%, m-o-m) and pulses & products (0.55%, m-o-m).

In the urban areas for November 2014, vegetables (3.38%, m-o-m) showed the biggestdowntick followed by sugar (1.60%, m-o-m), fruits (1.24%, m-o-m), and transport &communication (1.01%, m-o-m). In urban areas, there were also significant upticks observedfor pulses & products (1.44%, m-o-m), non-alcoholic beverages (1.24%, m-o-m), pan,tobacco & intoxicants (1.04%, m-o-m) and milk & products (1.03%, m-o-m).

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The latest reading on inflation, again lowest in the current series of CPI, has boosted themarkets further. This is expected to fuel further the expectations of an earlier rate cut bythe RBI. This development has also found support in the weak reading on IIP. However,one needs to keep in mind that such a low reading on headline CPI has been majorly aidedby a very strong base, which is expected to wear off from next month onwards. Moreover,15 out of 21 sub categories, with weight of 56%, have shown an uptick in November overOctober. As a result we feel that the RBI would wait for few more readings on retailinflation to confirm if the downtrend in inflation is sustainable. It could also possibly waitfor the budget announcement for getting clarity over the government’s call on supply sidemanagement, pending structural reforms as well as government’s own finances, beforemoving on rates.

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Economic Research – CPI Inflation Update - November 2014

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14

Food, Beverages & Tobacco Fuel & Light

Housing Clothing , Bedding & Footwear

Miscellaneous

Chart 1: Development in Rural Areas (M-o-M Inflation)

Source : IDBI Bank Ltd, Ministry of Statistics & Programme Implementation

Chart 2: Development in Urban Areas (M-o-M Inflation)

Source : IDBI Bank Ltd, Ministry of Statistics & Programme Implementation

Table 1 : CPI Inflation (Combined) YoY Table 2: Statewise CPI Inflation (m-o-m) for November 2014

Source : IDBI Bank Ltd, Ministry of Statistics & Programme Implementation

Source : IDBI Bank Ltd, Ministry of Statistics & Programme Implementation

Nov-14 Oct-14 Sep-14 Food, Beverages & Tobacco 3.64% 5.75% 7.62% Fuel & Light 3.27% 3.37% 3.45%

Housing 7.93% 8.12% 8.11% Clothing , Bedding & Footwear 6.97% 7.45% 7.59%

Miscellaneous 4.28% 4.69% 4.70% General Index 4.38% 5.52% 6.46%

State Rural Urban Combined Jammu & Kashmir 0.1% -0.9% -0.2%

Himachal Pradesh 0.0% -0.1% -0.1% Punjab 0.0% -0.6% -0.3% Chandigarh 0.1% -0.1% -0.1%

Uttarakhand -0.3% -0.7% -0.4% Haryana -0.2% -0.4% -0.3%

Delhi -2.2% -0.1% -0.2% Rajasthan 0.3% 0.0% 0.1%

Uttar Pradesh 0.1% -0.2% 0.0% Bihar 0.5% -0.3% 0.4%

Sikkim -0.6% 0.3% -0.4% Arunachal Pradesh -0.4% na na

Nagaland -0.1% 0.1% -0.1% Manipur 0.1% -0.3% -0.1%

Mizoram 0.2% -0.4% -0.1% Tripura 0.3% -0.1% 0.2%

Meghalaya 0.5% -0.4% 0.3% Assam -0.3% -0.3% -0.3%

West Bengal 0.2% -0.4% -0.1% Jharkhand 0.5% -0.8% 0.1% Odisha -0.4% 0.2% -0.3%

Chhattisgarh 0.5% 0.6% 0.5% Madhya Pradesh 0.4% -0.4% 0.1%

Gujarat 0.2% -0.2% -0.1% Daman & Diu 0.1% 0.4% 0.2%

Dadra & Nagar Haveli 0.7% 0.4% 0.5% Maharashtra 0.7% 0.1% 0.4%

Andhra Pradesh 0.5% 0.4% 0.4% Karnataka 0.4% 0.3% 0.3%

Goa 0.1% -0.5% -0.2% Lakshadweep 0.6% -3.0% -1.4%

Kerala -0.1% 0.6% 0.2% Tamil Nadu 0.7% 1.6% 1.2%

Puducherry 1.0% 0.7% 0.8% Andaman & Nicobar Islands 1.7% 0.8% 1.2%

All India 0.2% 0.1% 0.2%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14

Food, Beverages & Tobacco Fuel & Light

Clothing , Bedding & Footwear Miscellaneous

Economic Research – CPI Inflation Update - November 2014

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