Retail inflation may rise to 5.5% in Q4: Survey

Mumbai: The retail inflation is likely to rise to 5.5 percent in the last quarter of this fiscal and thereafter may moderate to 5.2 percent by September 2016, says an RBI-sponsored survey of professional forecasters.

"CPI (Consumer Price Index) headline inflation is expected to increase to 5.5 percent in the fourth quarter of 2015-16 and thereafter moderate to 5.2 percent in the second quarter of 2016-17," the Survey of Professional Forecasters on Macroeconomic Indicators released on RBI website said.

The forecasters expect core CPI (defined as excluding food and fuel) inflation to remain at around 5 percent till second quarter of 2016-17.

Rising for the third straight month, the retail inflation climbed to 5 percent in October due to costlier pulses and other food items.

While, Wholesale Price Index (WPI) based inflation is expected at around 1 percent in last quarter of the current fiscal and expected to increase to 2.4 percent in the second quarter of 2016-17.

The WPI inflation is in the negative zone for 12 months, the October data revealed.

It further said that forecasters expect real Gross Value Added at basic price (GVA) to increase by 7.4 percent in 2015-16.

'Agriculture and Allied Activities' and 'Services' are expected to grow by 1.5 percent and 9.3 percent, respectively. 'Industry growth forecast has been placed at 6.6 percent.

GVA is a new concept introduced by Central Statistical Office (CSO) to measure economic activity.

"In 2016-17, GVA is expected to increase by 7.8 percent, led by growth in 'Services' by 9.6 percent. 'Agriculture and Allied Activities' and 'Industry' are expected to grow by 2.7 percent and 6.9 percent, respectively," the survey said.

The central bank said the results of the survey represent the views of the respondent forecasters and "in no way reflect" the views or forecasts of the Reserve Bank. Twenty Four professional forecasters participated in the survey conducted in November 2015. 

As per the survey, gross saving rate is projected at 30.2 percent of Gross National Disposable Income (GNDI) in 2015-16 and increase to 30.6 percent of GNDI in next fiscal.

The survey expects the Central Government's gross fiscal deficit (GFD) at 3.9 percent of GDP in 2015-16 and moderate to 3.5 percent of GDP in next fiscal.

The combined GFD of Central and State Governments is projected at 6.3 percent of GDP in 2015-16 and is expected to improve to 6 percent of GDP in the following year.

Merchandise exports, the survey said is likely to decline by 10.3 percent in 2015-16 which constitutes a downward revision by 570 basis points (bps) from -4.6 percent in the previous round.

Growth in exports is expected to improve to 6.1 percent in 2016-17, the survey added.

As per the study, Current Account Deficit is projected at 1 percent and 1.4 percent of GDP in 2015-16 and 2016-17, respectively.