India CPI to Rise in 2017

India’s consumer price index inflation is likely to average around 5.3% in 2017, up from 5.1% in 2016, but the Reserve Bank of India might still cut repo rate by 25 bps in the first quarter of next year, says a Nomura report, Livemint reported. According to the Japanese financial services major, 2017 could well be another year of ‘sticky’ inflation that might breach the 6% mark during the fourth quarter of 2017. “We expect headline CPI inflation to average 5.3% in 2017, up from 5.1% in 2016 and 4.9% in 2015,” Nomura said in a research note. The report said, the underlying inflation is expected to remain sticky following the GST implementation, as higher taxes on services and the risk that manufacturers do not pass on the lower tax benefit to consumers could add 10-20 bps to headline CPI. “We expect CPI inflation to average 4.9% in the first half of 2017, but at a much higher 5.8% in the second half of 2017, owing to adverse base effects, with 6% likely to be breached in the fourth quarter,” the report said.