India set to see lower productivity, weak demand, inching inflation in the coming weeks: D&B

India may see lower productivity, weak rural demand along with higher inflation and depreciating Indian rupee in the coming weeks, Dun & Bradstreet economy forecast for February.

Industrial production is expected to remain subdued over moderate demand and uncertainty around the outcome of upcoming general election. Global trade tensions and subdued trade growth outlook is also expected to dampen the industrial production through trade and investment channels, D&B said in a statement.

The economic forecast said that inflation may be reined in and would be subdued but the rural demand will continue to remain weak. “Inflation rate is likely to edge up slightly higher in February given the base effect. The election related spending, and expected lower Kharif crop output would also exert inflationary pressures. CPI inflation will be in the range of 2.2%-2.4% and WPI inflation to be in the range of 2.65% – 2.80% during Feb, D&B said

“Domestic liquidity pressures, widening of credit and deposit growth and FII outflows are likely to keep upward pressure on yields. On the other hand, Reserve Bank of India‘s (RBI) policy-stance change, the policy rate cut, falling inflation and low inflation expectations by households both in the near and long term are likely to keep yields depressed,” the D&B statement read.

While the government has been taking several initiatives proper implementation of these would become crucial as per the research.

“Rupee is likely to depreciate further over concerns over slowdown in global trade, FII outflow pressures, rising crude oil prices, and the political uncertainty. The rupee to depreciate to around 71.2 per US$ during Feb,” the research said.

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