India's retail inflation, measured by the All-India Consumer Price Index (CPI), hit an 18-month low of 4.7% in April compared with 5.66% in March on easing food prices, according to data released by the Ministry of Statistics and Programme Implementation.

The CPI-based inflation has now remained within the Reserve Bank of India's (RBI) target band of 4%-6% for the second straight month.

While rural inflation eased to 4.68% in April from 5.51% in March, urban inflation stood at 4.85% in April as against 5.89% in March.

The inflation rate for vegetables contracted to 6.5% in April. Inflation in edible oils and other fats narrowed to 12.33%.

Fuel and light inflation also moderated to 5.52% in April from 8.91% in March. The inflation rate for clothing and footwear came down to 7.47% in April from 8.18% in March.

However, spices saw 17.43% inflation in April followed by cereals at 13.67%. Milk and milk products witnessed 8.85% inflation rate in April.

Core inflation eased to 5.7% in April, recording the first sub-6% print after 10 months.

"A favourable base dampened the headline CPI inflation to a lower-than-expected 4.7% in April. Around 90% of the dip was led by food and beverages, fuel and light and miscellaneous items," says Aditi Nayar, chief economist, ICRA.

The rating agency expects retail inflation to be range bound at 4.7-5% in May-June 2023.

IIP growth at 5-month low of 1.1%

The Index of Industrial Production (IIP) grew 1.1% in March – the slowest pace in five months, according to official data released on Friday. It had risen 5.6% in February. IIP grew 5.6% in February.

For the full fiscal year 2022-23, IIP rose 5.1% compared with a growth of 11.4% in 2021-22.

The manufacturing sector's output - which accounts for more than three-fourth of the IIP - increased 0.5% in March 2023 as against 5.3% in February, the data released by the National Statistical Office (NSO) shows.

Electricity output declined 1.6% in March compared with 8.2% in the previous month. The mining sector output grew 6.8% in March as against 4.6% in February.

Primary goods' output growth more than halved to 3.3% in March from 6.9% in February.

ICRA expects MPC to continue its pause on rate hike again in June.

"With the CPI inflation below 5% and surprisingly subdued industrial growth, we see a high likelihood of a pause from the Monetary Policy Committee (MPC) in its next meeting, even as a pivot to rate cuts appears distant," says Nayar.

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