Retail inflation eases to 5.02% in September, IIP output rises 10.3% in August

India's retail inflation declined to a three-month low of 5.02 in September, mainly due to easing food prices, according to the government data released on Thursday.

India's industrial production increased by 10.3 per cent in August, according to the official data released on Thursday.

The inflation has come back to the Reserve Bank's comfort level of below 6 per cent after a gap of two months. The inflation based on the consumer price index (CPI) was 6.83 per cent in August and 7.41 per cent in September 2022.

The previous low was in June this year when the reading stood at 4.87 per cent.

According to the data released by the National Statistical Office (NSO), the inflation in the food basket came down to 6.56 per cent in September from 9.94 per cent in the preceding month.

The Reserve Bank mainly factors in retail inflation while arriving at its bi-monthly monetary policy.

Factory output measured in terms of the Index of Industrial Production (IIP) had contracted by 0.7 per cent in August 2022.

The data released by the National Statistical Office (NSO) showed that the manufacturing sector's output increased by 9.3 per cent in August 2023.

Mining production rose 12.3 per cent during the month under review. Power output grew 15.3 per cent in August 2023. The IIP grew by 6.1 per cent in April-August 2023 compared to 7.7 per cent in the same period of 2022-23.

"For the December quarter, we expect some softening in food inflation with the kharif harvest entering the market along with government intervention. But there could be limited respite for pulses and cereals inflation. Crude oil could play spoilsport if the Middle east conflict escalates. We expect the Reserve Bank of India (RBI) to look through the September quarter hump but stay vigilant since headline inflation remains much above the Monetary Policy Committee’s (MPC) 4% target and risks are tilted on the upside due to the flare-up in crude oil prices. For this fiscal, in the base case, we expect inflation to average 5.5% and expect the MPC to maintain to policy rate and stance," said Dipti Deshpande, Principal Economist, CRISIL.

"Consumer Price Inflation (CPI) YoY came in at 5.02%, lower than market expectation of 5.30% - 5.40%. Within CPI, the food inflation continues to be high at 6.56% with pulses and cereals remaining high. Core inflation has come-off further at 4.5% and this bodes well for future inflation expectations and also provides comfort to RBI w r t probability of meeting inflation trajectory. I think this would be positive for markets and provide breather to yields, which were headed higher since MPC review further fueled by geo-political developments. Overall positive for markets," said Akhil Mittal – Senior Fund Manager- Fixed Income, Tata Asset Management.

With inputs from PTI