Retail inflation dipped to 4.85 per cent in March 2024 as against 5.09 per cent in February, fresh data released by the Ministry of Statistics & Programme Implementation stated on Friday. Industrial production rose to a four-month high of 5.7% in February compared with 4.2% in January.
The inflation rate is within the Reserve Bank of India's (RBI) tolerance range of 2-6 per cent. Compared to Febuary's decrease of -0.11 per cent, the inflation rate rose to 0.16 per cent in the latest period, on a sequential basis.
The factory output measured in terms of the Index of Industrial Production (IIP) witnessed a growth of 6 per cent in February 2023.
India's Index of Industrial Production grew by 5.7 per cent in February 2024, an official statement said. The data released by the National Statistical Office (NSO) showed that the manufacturing sector's output grew 5 per cent in February 2024, down from 5.9 per cent in the year-ago month.
In February this year, mining production rose 8 per cent, and power output increased 7.5 per cent.
The IIP grew 5.9 per cent during April 2023-February 2024 compared to a 5.6 per cent expansion in the year-ago period.
After the first MPC meeting of this financial year, the central bank predicted CPI inflation to be around 4.5 per cent for FY2024-25.
Last week, RBI Governor Shaktikanta Das said food price volatility remains a concern. Referring to inflation as the prominent challenge, he called it "the elephant in the room". He said: "The elephant has now gone out for a walk and appears to be returning to the forest." Meaning the inflation (elephant) appears to be receding to the desirable benchmark (forest) of 4 per cent.
Food price rises have outpaced headline inflation for several months, affecting millions of poor households already heavily dependent on government food subsidies.
In Jan-Feb 2024, the headline inflation dipped to 5.1 per cent from 5.7 per cent recorded in December. The erratic food prices was a concern due to inflation uncertainties.
"Headline inflation has eased from its December peak; nevertheless, the persistent pressure from food prices is impeding the ongoing disinflation process, presenting obstacles to achieving the target," Das said.
"The CPI inflation moderated to 4.85% in March 2024, but exceeded our forecast of 4.7%, with food inflation softening only marginally as compared to the previous month and core inflation steady at 3.5%. ICRA estimates the food & beverages inflation to remain above the 7.0% mark in April 2024. An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon in 2024 to keep food inflation in check and inflationary expectations well-anchored. The ongoing uptrend in international crude oil prices could also pose a risk to the CPI inflation outlook in the near term, although the extent of the impact would depend on the pass-through to retail fuel prices, and the impact of such transmission would be relatively lesser compared to the WPI inflation given the different weights of fuel items in the CPI and the WPI baskets. Monetary easing is likely to be quite back-ended in 2024, pending clarity on various factors such as the turnout of the monsoon, evolution of crude oil prices as well as rate action from the US Fed. At best, we foresee 50 bps of rate cuts from the MPC, in H2 FY2025," said Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd.
“The headline inflation for March has come in line with expectations. While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months. Overall, we expect the MPC to remain on a wait-and-watch mode until H1FY25, with possible easing likely towards the latter part of FY25 depending on the evolution of monsoons, crude oil prices and timing of Fed’s rate easing cycle,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.