Double Delight: India's industrial production index grows by 7.1% in November; retail inflation eases to 5.72% in Dec

[walterbibikow]

India's retail inflation rate eased down edged down from the previous month, staying within the Reserve Bank of India's (RBI) comfort range of 2%-6% for a second month, data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed on Thursday.

The Consumer Price Index (CPI)-based inflation rate eased to 5.72% in December. It was 5.88% in November, and 6.77% in October 2022.

The government has mandated the RBI to maintain retail inflation at 4% with a margin of 2% on either side for a five-year period ending March 2026.

Lower food prices, particularly the fall in vegetable prices, helped keep inflation within the tolerance range.

Food inflation, which accounts for about 40% of the inflation basket, came in at 4.19% in December as against 4.67% in the preceding month.

Aditi Nayar, Chief Economist, ICRA, said: "We expect the core inflation to remain elevated in Q4 FY2023, given the continued pass-through of higher input costs by producers and sustained robust demand for services.

"We caution that the CPI inflation for January 2023 may print at ~5.8-6.0%, slightly higher than the levels seen in December 2022, given the stickiness in core inflation and an unsupportive base for food inflation," Nayar added.

"This inflation print should nudge the RBI to reduce the quantum of its rate hike in February to 25 bps. Going forward, inflation is expected to average 6.5% in FY23 and 5.2% in FY24," said Sakshi Gupta, Principal Economist at HDFC Bank

"That said, for the next fiscal, there are emerging risks to the inflation outlook next year, particularly in regards to any rise in commodity prices due to the China reopening underway and the continued stickiness in core inflation. As a result, the RBI is likely to remain watchful and we do not see the possibility of a turn in the interest rate cycle (rate cuts) in FY24," Gupta added.

"It is a double delight as the January CPI inflation has stayed below the 6% mark for two months in a row. The fall is largely due to the softness in the vegetables and food inflation. But the core inflation is a cause of concern as it has remained above the 6% mark. The effects of rising rates have started to reflect in the overall inflation data," said Nish Bhatt, Founder & CEO, Millwood Kane International.

"December CPI headline came in softer than expectations, largely led by lower food prices. However, core inflation continues to remain elevated and sticky," said Upasna Bhardwaj, Chief Economist of Mumbai's Kotak Mahindra Bank.

To rein in inflation, the Reserve Bank of India has raised interest rates by 225 basis points, including a 35 basis points hike last week.

IIP:
On the other hand, India's factory output based on the Index of Industrial Production (IIP) grew 7.1% year-on-year in the month of November, Ministry of Statistics and Programme Implementation data showed on Thursday. For the April-November period, it grew by 5.5%, data showed.

The Quick Estimates of Index of Industrial Production (IIP) are usually released on 12th of every month with a six weeks lag and compiled with data received from source agencies, which in turn receive the data from the producing factories/ establishments.

Retail inflation eases to 5.72% in Dec; IIP growth rebounds to 7.1% in Nov

As per the data released by the NSO, India's CPI inflation in the food basket was at 4.19% in December as against 4.67% in November

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