India's CPI Inflation In January 2024 Eases to Three-Month Low of 5.1%; IIP Grows 3.8%

India’s retail inflation in January 2024 has eased to 5.1 per cent on slowing food price rises and favourable base effects, according to the latest official data released on Monday.

Meanwhile, India’s industrial output, based on the Index of Industrial Production (IIP), grew 3.8 per cent in December 2023, according to the latest official data released separately. It had grown 6.4 per cent in November 2023.

India’s CPI inflation had stood at 6.52 per cent in January 2023 and 5.69 per cent in December 2023. In August 2023, inflation touched a high of 6.83 per cent.

As per the data released by the National Statistical Office (NSO), retail inflation in the food basket was at 8.3 per cent in January 2024, down from 9.53 per cent in the preceding month.

The Reserve Bank of India has been tasked by the government to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side. In the monetary policy announced last week, the RBI projected the CPI inflation at 5.4 per cent for 2023-24.

It highlighted “large and repetitive food price shocks” as one of the biggest risks to the ongoing disinflation trend.

Aditi Nayar, chief economist and head (research and outreach) at ICRA, said, “The CPI inflation recorded a broad-based slide to a three-month low 5.1 per cent in January 2024 from 5.7 per cent in December 2023. The correction in the inflation for food and beverages was led by a favourable base effect. While rabi sowing has caught up with last year’s level, reservoir storage remains well below the year-ago levels in most regions, continuing to imbue caution into the outlook for the rabi harvest. Inflation for the miscellaneous sub-group, which includes various services, fell below 4 per cent after a gap of 49 months, and is expected to remain sub-4% over H1 CY2024, auguring well for the core inflation.”

She said that the CPI inflation is projected to ease below 5 per cent in February-March 2024, and average at 5.3 per cent in FY2024.

Industrial Output Growth in December 2023

India’s industrial output, based on the Index of Industrial Production (IIP), grew 3.8 per cent in December 2023, according to official data released on Monday. It had witnessed a growth of 5.1 per cent in December 2022.

“India’s Index of Industrial Production grows by 3.8 per cent in December 2023,” an official statement said. The data released by the National Statistical Office (NSO) showed that the manufacturing sector’s output grew 3.9 per cent in December 2023, up from 3.6 per cent in the year-ago month.

In December last year, the mining production rose 5.1 per cent and power output increased 1.2 per cent. IIP grew 6.1 per cent during the April-December 2023 period compared to a 5.5 per cent expansion in the year-ago period.

ICRA’s Aditi Nayar said, “In contrast to the slowdown in the core sector growth, the YoY growth in the IIP rose to 3.8 per cent in December 2023 from 2.4 per cent in November 2023, led by an improvement in the performance of manufacturing. In terms of the use-based categories, only primary goods reported a sequential moderation in December 2023, with all five other categories reporting an improvement. With the available high-frequency data for January 2024 appearing promising, we anticipate a modest rise in the IIP growth to 4-6 per cent in that month.”