|India's WPI (Bloomberg)|
The currency has strengthened considerably lately, giving INR some room to maneuver. It would be far more difficult to lower rates in the face of a weakened currency, which hit close to 54 rupees per dollar late last year.
|USD-INR exchange rate|
Tuesday's number is particularly important because core inflation has been stubbornly high.
JPMorgan: One worrying part of the upbeat PMI readings from India has been that output prices, which are a good leading indicator for non-food manufacturing (core inflation), stayed well above 50, while input prices continued to increase sequentially, reaching 63.4. If the sequential momentum of inflation does not abate soon, then over-year-ago inflation rates will start to rise in April.A surprise to the upside could have negative consequences for India's interest rates, equity markets, and consequently growth expectations.