India’s retail inflation rate decreased to 5.10% annually, marking a decline from December’s four-month high of 5.69%, as per data released by the Ministry of Statistics & Programme Implementation on Monday. Notably, a Reuters poll of 44 economists had anticipated a three-month low of 5.09%. This figure remains within the Reserve Bank of India’s (RBI) acceptable range of 2-6%.
Both rural and urban inflation rates witnessed declines to 5.34% and 4.92%, respectively, compared to 5.93% and 5.46% from the same period last year. The drop in inflation can be attributed to a cooling off in food prices, with food inflation for January standing at 8.30% compared to December’s 9.53%. Vegetable inflation also saw a slight decrease from 27.64% in December to 27.03%. Additionally, fuel and light inflation contracted to -0.60% from -0.99% the previous month. Sequentially, inflation contracted by -0.11% compared to the previous month’s -32%, as per the released data.
In terms of Industrial Production (IIP) data, India’s industrial production rose to 3.8% in December 2023, up from 2.4% in November 2023, as reported by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday. In October 2023, IIP was recorded at 11.7%. The growth in factory output, measured by the Index of Industrial Production (IIP), was 5.1% in December 2022, according to the Ministry’s press release. For April-December 2023-24, IIP growth reached 6.1%, up from 5.5% during the same period the previous year.
Looking at the Reserve Bank of India’s (RBI) inflation forecast, despite concerns about food price increases and uncertainties surrounding crude costs and domestic growth momentum, the RBI kept its inflation forecast for FY24 unchanged at 5.4% during its February meeting. RBI Governor Shaktikanta Das emphasized the volatility in food prices but noted a deepening deflation in CPI fuel and a moderation in core inflation to a four-year low of 3.8% in December. The RBI highlighted geopolitical events and their impact on supply chains, along with volatility in international financial markets and commodity prices, as significant upward risks to inflation. Looking ahead, the RBI forecasted inflation rates of 5%, 4%, 4.6%, and 4.7% for Q1FY25, Q2FY25, Q3FY25, and Q4FY25, respectively, assuming a normal monsoon next year.
Discussing India’s efforts to control inflation, Finance Minister Nirmala Sitharaman, while presenting the Interim Budget 2024-25 in the Lok Sabha, highlighted the government’s measures to stabilize inflation. She noted that retail inflation has stabilized and fallen within the tolerance band due to government measures to control price rises, particularly in perishable commodities.
