OPEC Monthly Oil Market Report – August 2017
Graph 3 - 16: Indian GDP growth
Graph 3 - 17: Indian inflation vs. Repo rate
increased 1.54% y-o-y in June 2017, slowing sharply from a 2.18% rise in May and
below market expectations of 1.7%. The inflation rate fell to a fresh record low for the third month as food
prices declined faster amid a favourable monsoon. The Wholesale Price Index (WPI) rose 0.9% y-o-y in June
of 2017, compared to a 2.17% rise in May and below market estimates of a 1.6% rise. It was the lowest WPI
inflation since July of 2016, as the cost of manufactured products and fuel went up at a slower pace and food
prices fell further. On a monthly basis, WPI decreased by 0.1%, after falling 0.4% in a month earlier. In May
2017, the government revised the base year to 2011–12 from 2004–05, aiming to align it with the base year
of other indicators like the GDP and the industrial production index.
After a 10-month pause, the Monetary Policy Committee of the Reserve Bank of India (RBI) has lowered the
leading repurchase rate by 25 basis points to 6.0%. Consequently, the reverse repo rate was adjusted to
5.75% and the marginal standing facility rate to 6.25%.The decision to cut interest rates in an environment of
volatile financial markets and gradually rising interest rates in the United States was mainly driven by the
sudden and abrupt easing of inflation since April. This pushed real interest rates in June to their highest
levels since November 2014. The RBI's latest rate cut is justified given the above developments, but it is
unlikely to significantly boost credit and growth. Despite the rate cut, the Indian economy continues to show
further signs of easing amid sluggish private consumption and falling investment, dragged down by ongoing
deleveraging in the banking and corporate sector, and further weakened by the double shock to consumers
and businesses from the government's demonetisation last year and the new GST roll-out in July.
Graph 3 - 18: Indian trade balance
Sources: National Informatics Centre (NIC) and
% change y-o-y
Consumer price index (CPI)
CPI lower target bond
CPI higher target bond
Wholesale price index (WPI)
WPI confort zone
Sources: Ministry of Commerce and Industry, Reserve Bank of
India and Haver Analytics.
Sources: Ministry of Commerce and Industry and Haver Analytics.