Retail inflation softens to 3-month low in Jan; IIP grows by 3.8%

India's retail inflation, based on Consumer Price Index Numbers, eased to a three-month low of 5.10% in January 2024 against 5.69% during the previous month, the latest data released by the Ministry of Statistics & Programme Implementation shows.

The CPI (General) for the month of January fell to 4.92% in urban India against 5.46% in December, while the headline inflation in the rural areas was recorded at 5.34% in January against 5.93% in the previous month.

Notably, the retail inflation during the same period last year, i.e. January 2023, was 6.52%, comprising 6.85% in rural areas and 6% in urban India.

The inflation, based on the Consumer Food Price Index (CFPI), was recorded at 8.30% in January 2024, down from 9.53% in December 2023. The food inflation fell in both rural and urban areas in January 2024.

The headline inflation had moderated to an average of 5.5 per cent during April-December 2023 from 6.7% during 2022-23. Food price inflation, however, continued to impart considerable volatility to the inflation trajectory.

In contrast, the deflation in CPI fuel deepened and core inflation (CPI inflation excluding food and fuel) had moderated to a four-year low of 3.8 per cent in December. The decline in core inflation continued to be broad based with inflation remaining steady or softening across its constituent groups and sub-groups.

During the bi-monthly monetary policy committee announcements of the RBI, Governor Shaktikanta Das on February 8, 2024, had said the inflation trajectory, going forward, would be shaped by the outlook on food inflation, about which there is considerable "uncertainty". "Adverse weather events remain the primary risk with implications for the rabi crop. Increasing geopolitical tensions are leading to supply chain disruptions and price volatility in key commodities, particularly crude oil."

On the positive side, he said, the progress in rabi sowing had been satisfactory and augurs well for the season. "Prices of key vegetables, especially onions and tomatoes, are registering seasonal price correction."

Taking these factors into account, the RBI had projected the CPI inflation at 5.4% for the current year (2023-24), with Q4 at 5.0%. "Assuming a normal monsoon next year, CPI inflation for 2024-25 is projected at 4.5 per cent with Q1 at 5.0 per cent; Q2 at 4.0 per cent; Q3 at 4.6 per cent; and Q4 at 4.7 per cent. The risks are evenly balanced," Das said.

India's IIP grows by 3.8% in December 2023

India's factory output, meanwhile, grew 3.8% in December 2023, the data released by the Ministry of Statistics & Programme Implementation shows. "The quick estimates of the Index of Industrial Production (IIP) stands at 151.5. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for December 2023 stand at 139.4, 150.6 and 181.6 respectively," the statement says.

The IIP in November 2023 stood at 2.4%, while during the year-ago period, the factory output stood at 5.1%. In the fiscal year so far till December 2023, the industrial growth stood at 6.1% vs 5.5% in the year-ago period.