India’s retail inflation eased to an 18-month low of 4.7% in April, staying below the Reserve Bank of India’s 6% tolerance limit for price increases for the second month in a row, aided by base effects from last April when it hit the eighth level had reached Year’s high of 7.8%.
The price hike faced by urban consumers declined to 4.85% in April from 5.9% in March, while it declined to 4.7% from 5.5% for their rural counterparts. Inflation eased to 3.84% last month from 4.8% in March, according to the Consumer Food Price Index.
Economists emphasized that base effects were visible in moderating inflation across all broad sectors from April 2022. However, high inflation in pulses and personal care products as well as the continued sharp rise in prices of commodities like cereals and milk are a matter of concern, as vegetables are expected to see a seasonal jump in prices.
On a sequential basis, the consumer price index (CPI) rose 0.5%, while food prices rose 0.6% from March levels, a month-on-month increase that doubled from February to March, when headline retail inflation year-on-year 5.66% was calculated on the basis of
While vegetable prices continued their year-on-year decline, falling 6.5% in April, they were 1.8% higher than March 2023 prices. Edible oils and fats saw deflation for the third month in a row, a sharp decline of 12.33% from April 2022, when global supplies were jolted in the immediate aftermath of the Russia-Ukraine conflict.
Aditi Nair said, “The 4.7% inflation print in April benefited from not only a higher base, but also lower than normal temperatures last month, which delayed the seasonal rise in prices of perishable commodities and some vegetables.” Helped keep prices under control. Chief Economist, ICRA.
Inflation in milk and milk products eased marginally from 9.3% in March to 8.85% in April, as did cereals (fell from 15.3% in March to 13.7% in April) and spices which eased from 18.2% to 17.4% The % in April.
“Sequential price movements in items such as milk and pulses remain a concern,” said Rajni Sinha, chief economist at Care Ratings, which expects retail inflation to remain below 5% till June and average 5.1% for 2023-24. % will remain.” “Weather-related disruptions could be the main threat to food inflation and overall CPI inflation,” he added.
Bank of Baroda chief economist Madan Sabnavis said price pressures are also visible in pulses, whose inflation rose from 4.3% in March to 5.3% in April.
“As traders await the new crop in October, there will be pressure on prices and inflation will remain high till then. Monsoon prospects are important here as pulses are weak given limited access to irrigation.
There was a consensus among economists that the central bank would continue its pause on interest rate hikes, buoyed by easing headline inflation, but a rate cut is unlikely amid concerns about the monsoon and kharif crop.
“With CPI inflation falling below 5% and industrial production growth surprisingly falling (at a five-month low of 1.1% in March), we expect a high probability of a pause from the RBI’s Monetary Policy Committee in its next meeting. We do. However, the pivot to a rate cut appears to be a long way off,” Ms. Nair said.
While fuel and light inflation fell sharply from 8.9% in March to 5.5% in April, the cost of clothing and footwear eased to 7.5% from 8.2% in April. Inflation in personal care and effects rose from 8.25% in March to 9% in April, and in education from 5.42% to 5.7% in April. The pace of price rise in health costs and household goods and services stood at 6.3% and 6.5%, respectively, in April.
industrial production skid
Industrial production growth slowed to a five-month low of 1.1% in March 2023, down from 5.8% in February, electricity, consumer durables and non-durables recorded contraction from a year ago, and manufacturing only was rising 0.5%
Mining output grew by 6.8% in March, while capital goods and infrastructure/goods output increased by 8.1% and 5.4%, respectively. However, primary articles output growth decelerated from 6.9% in February to 3.3% in March. Intermediate goods grew at a slower pace of 1.1%, but this was a three-month high after rising 0.5% in January and 0.7% in February.
Electricity generation contracted 1.6% in March, the first decline in at least a year. The decline in electricity generation comes three months after an increase of more than 10% from November 2022 and an increase of 8.2% this February.
For the full year 2022-23, India’s industrial production was set to grow by 5.1% as compared to growth of 11.4% in 2021-22. Electricity production increased by 8.9% in the year, with mining and manufacturing increasing by 5.8% and 4.5%, respectively.
Consumer durables output contracted for the fourth month in a row, with the decline falling to a three-month low of 8.4%. The production of consumer durables fell by 11.2% in December, 8.2% in January and 4.07% in February.
Overall consumer durables as well as consumer non-durables production grew by only 0.5% in 2022-23. The latter saw the first contraction in output in a five-month period in March, down 3.1%. Both these segments also registered a decline in March 2022, with durables declining by 3.1% and non-durables by 4.4%.
Divided by end-use, capital goods grew the fastest at 12.9% in 2022-23, followed by infrastructure/construction goods (8%) and primary goods (7.4%). Intermediate goods grew by 3.7% as compared to 15.4% in 2021-22.
“The Index of Industrial Production or IIP growth of 1.1% in March is a big disappointment as we had expected a better number of 3.5%,” said Madan Sabnavis, chief economist at Bank of Baroda. “The normal year-end event of production in March did not happen this time. The IIP numbers also do not match with the Purchasing Managers’ Index (PMI) indicators, so we need to look at the PMI readings carefully,” he stressed.