This surge in expenditure is pushing core inflation higher and could keep overall consumer price inflation well above the Reserve Bank of India’s (RBI’s) 4.7 per cent target by March 2019, raising odds that the RBI may raise rates more than once in coming months.
Why this is important?
Consumer spending helped India post robust 7.7 per cent growth in the March quarter, it is also a potential inflation landmine. Core inflation has recovered from the troughs hit after the twin shocks of demonetisation and GST.
Stock to be impacted?
Increase in rate will benefit banks like HDFC, STATE BANK. Whereeas increase in consumption is positive for Automobile and FMCG sector.