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

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

India's CPI inflation in November was at 5.88%

Retail inflation marginally eases to 5.72% in December Retail inflation marginally eases to 5.72% in December

India's headline retail inflation marginally eased to 12-month low of 5.72 per cent in December 2022 from 5.88 per cent in November, showed government data on Thursday.

The latest inflation print was below the Reserve Bank of India's (RBI) upper tolerance level of the 2 per cent-6 per cent range for the second consecutive month.

IIP growth returned to positive territory in November at 7.1 per cent after it contracted by 4 per cent in October. 

The Index of Industrial Production (IIP) grew by 1 per cent in November 2021.

As per the IIP data released by the National Statistical Office (NSO), the manufacturing sector's output grew by 6.1 per cent in November 2022.

The mining output rose by 9.7 per cent and power generation increased by 12.7 per cent during the month under review.

Food price inflation, which accounts for nearly 40 per cent of the consumer price index (CPI) basket, eased to 4.19 per cent in December from 4.67 per cent in November.

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

"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.

"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," Sakshi Gupta, economist HDFC Bank told Reuters. 

"December CPI headline came in softer than expectations, largely led by lower food prices. However, core inflation continues to remain elevated and sticky. Overall, as the focus remains on the headline, which is clearly softening along with the benign global environment, the MPC will get a breather to further moderate the pace of monetary tightening. We expect the one final 25 bps rate hike in February followed by a prolonged pause," Upasna Bhardwaj, chief economist, Kotak Mahindra Bank told Reuters.

Published on: Jan 12, 2023, 5:37 PM IST
Posted by: Jamma Jagannath, Jan 12, 2023, 5:33 PM IST