Key Economic Forecast
While the IIP is expected to remain muted owing to the low investment and weak external
demand, it is likely to edge on the positive zone supported by the festive season related
demand and the favourable base effect. D&B expects IIP to have grown by 0.0%-0.5% during
Prices are likely to remain on the downside as long as the vegetable prices, which have been
the key commodity to drag down the overall CPI inflation in last two months, continue to fall and
demand remains benign. The upside risks to price still exists from the strengthening of the core
inflation primarily owing to the inching up of the inflation in the services segment and the fuel
group. D&B expects the CPI inflation to be in the range of 4.1%-4.3% and WPI inflation to be
in the range of 3.5% - 3.7% during Oct-16, respectively.
|Money & Finance:||
Cut in repo rate by 25 basis point, moderation in CPI inflation rate and FII inflows in the debt
market will continue to keep yields across maturities lower. D&B expects 15-91 day T-Bill yield
to average at around 6.3%-6.5% and 10-year G-sec yield at around 7.0%-7.2% during Oct-16.
While increase in the forex reserve and improvement in current account are likely to provide
some cushion to Indian rupee in the short term, strengthening of dollar, expectation of Fed
hiking the interest rate towards end of 2016, liquidity pressures given FCNR (B) redemption
and overvaluation of rupee will continue to put pressure on rupee going forward. D&B expects
the rupee to trade in the range of around 66.70-66.90 per US$ during Oct-16.