A Morgan Stanley report suggests inflation and industrial growth to remain on the higher side as other economic metrics that include IIP, WPI and CPI are expected to trend up. The CPI inflation is expected to get closer to the RBI's target of 4% at 3.8% while WPI is expected to move an inch up to 3.4% in the month of September as against 3.2% in August. Costly fruits and vegetables have pushed retail inflation to 3.36%, a 5-month high in August.
On the back of rising inflation, the global financial services company remarked "rising inflation trajectory will mean that the central bank will keep rates on hold". In its bi-monthly policy review, the RBI kept the rates unchanged fearing inflation and at the same time lowered India's growth prospect measured in terms of GDP at 6.7% for the current FY.
Nonetheless, industrial production is expected to gain in trajectory as exports are expected to remain strong and also the otherwise stalled production in different sectors of the economy are again likely to gain ground as the impact of GST roll out is fast receding. For the month of August, the IIP is expect to reach 1.7% on the back of favourable landscape including production of core industries', passenger vehicle production and steel demand.
The report further added "Looking ahead, we do expect that the economy should now have a clear runway for growth with both consumption and exports picking up".
With Inputs from PTI