he down tick seen in the consumer price index (CPI) number yesterday could be a one-off.

In fact, the next few months could see headline CPI inflation moving higher, believes Sonal Varma, India Economist, Nomura Financial Advisory & Securities. She is expecting the number to inch back up to 8.5 percent. And there could be two factors responsible for that. One, the current adverse weather conditions in India like the unseasonal winter rains, hailstorms in certain part of India and the El Nino phenomena could again pose a risk to food inflation and vegetable prices may go up. Two, the moderation seen in core CPI was mainly because of transport and communication segment and if one excludes that then the number was indeed higher said Varma. "The underlying services segments of CPI still remains very sticky, some segments like medical, education which are relatively inelastic as compared to some of the other items like personal care which are more elastic to demand," she said. Therefore, with Reserve Bank of India (RBI) keenly watching inflation numbers, the house expects it to remain status quo in the April 1 monetary policy. In fact sees a rate hike later on, said Varma. On the IIP front, she sees some moderation in February numbers but says the underlying trend on the industrial side is one of very prolonged consolidation. So, 2014 could be a year of growth consolidation and 2015 one could see some growth recovery in India, says Varma. Below is the interview of Sonal Varma, India Economist, Nomura Financial Advisory & Securities with Latha Venkatesh & Reema Tendulkar on CNBC-TV18. Latha: Is this the beginning of good news on inflation or is it just one good number? A: In the near-term this maybe one-off number. The moderation we have seen on inflation in February and through the course of December-January as well has been vegetables driven and much of the month on month decline in vegetable prices is behind us, in fact there are a number of risks emerging on the food inflation front because of various adverse weather conditions in India. So, it looks like we may see food inflation picking up again in the coming months plus the disinflation we have seen on the core inflation side has been very gradual. For instance if you see the moderation in core consumer price index (CPI) in yesterdays numbers, it is largely because of transport and communication segment which includes petrol and diesel. Therefore you exclude transport segment then underlying core inflation has also actually increased. So, it appears that given this two factors on food and on core inflation, we might see headline CPI inflation moving higher in the next few months again. Latha: You expect that inflation will go back above eight in the next quarter. When are you penciling a rate cut -not in 2014? A: Our base case is for status quo right now in April and we are still building in hike after that. So, we do not think that interest rates are going to be cut anytime soon and we are expecting the next reading on CPI inflation to start inching back towards 8.5 percent. There are some adverse base effects but the underlying services segments of CPI still remains very sticky, some segments like medical, education which are relatively inelastic as compared to some of the other items like personal care which are more elastic to demand. We are still seeing high inflation in the relatively inelastic part of the service basket on CPI plus we have seen unseasonal winter rains, we have seen hailstorms in certain part of India, the El Nino phenomena seems to be picking up. Therefore, we would think that there will be some build-up in price pressures, in food items like pulses, edible oil to an extent sugar going forward and wheat as well. Post the hailstorm the actual output is likely to be lower because of the unseasonal weather patterns. Therefore, our view is near term that is yesterdays February CPI reading at 8.1 is probably the near -term bottom and in the next few months we will see CPI going higher. In the last quarter of 2014 because of base effects CPI will come down again but that is a base play. I think what we are focused on is what the underlying trend in CPI inflation is and that is still around 8.5 percent on our estimates. Reema: When are you expecting a rate hike? In April you are expecting a status quo. With respect to the rate movements could you tell us your trajectory? A: Our expectation is for a hike after the April policy. So, whenever the date is set, which could be some time in June. Latha: Any word on the IIP number? A: The IIP numbers were better than expectations so it looks like the rural side and the external side has been better. The February export number have been weak so it is possible that the IIP numbers see a moderation again in February but the underlying trend on the industrial side is one of very prolonged consolidation. For the last 18 months we have been going up and down around zero and this time it is no different. We continue to get some good numbers, we should get good numbers on the export front in the second half of 2014 because Nomuras house view is that the soft patch in US, is temporary therefore export should pickup in the second half of 2014, which is good but on the fiscal and monetary policy side things are still going to be tight. So, 2014 is a year of growth consolidation. In our view 2015 is when we will see growth recovery in India. 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