India’s benchmark inflation number, as measured by the Consumer Price Index (CPI), remained flat between January and February. The headline retail inflation number came in at 5.09% in February compared to the 5.1% print for January 2024. The January and February CPI prints, when read with the recent reduction of ₹100 in LPG cylinder prices — this will show up in the March inflation numbers — mean that CPI will be close to the RBI’s forecast of 5% for the quarter ending March 2024. The February inflation number is also in line with analyst forecasts. A Bloomberg poll of economists had projected this number to be 5.05%.
Read here: Retail inflation almost unchanged at 5.09% in Feb against 5.1% in Jan: Govt data
While the overall CPI number is still above RBI’s target of 4%, core inflation, which measures the non-food and non-fuel part of the CPI basket, fell to 3.37%, according to the Centre for Monitoring Indian Economy (CMIE) database. This is the lowest core inflation level since November 2019 and suggests that the Indian economy is far from overheated at the moment.
To be sure, food inflation increased marginally from 8.3% in January to 8.6% in February . This is largely a reflection of a sharp jump in the prices of eggs, fish and meat — the category saw an increase in inflation from 1.6% in January to 5.7% in February. To be sure, food inflation increased marginally from 8.3% in January to 8.7% in February . This is largely a reflection of a sharp jump in the prices of eggs, fish and meat — the category saw an increase in inflation from 1.6% in January to 5.7% in February. Vegetable inflation also increased from 27.1%in January to 30.3% in February
While inflation for cereals and pulses has come down marginally from January levels, the future inflation outlook for these items will depend on the harvest of the winter crop. There are anecdotal reports that western disturbance driven rains in parts of north and north-west India might have led to some crop damage.
In another set of indicators released by the National Statistical Office (NSO), the Index of Industrial Production for the month of January came in slightly lower than analyst projections. At 3.8%, IIP growth in January was 30 basis points – one basis point is one hundredth of a percentage point – lower than a Bloomberg forecast and also lower than the 4.25% print for the month of December 2023. Manufacturing, which has a weight of more than three-fourth in the IIP basket, grew at 3.2% in January compared to 4.5% in December 2023. While the latest IIP numbers are in line with expectations of growth losing some momentum in the quarter ending March , caution should be observed in reading it as a sign of a large fall in economic momentum in the manufacturing sector. Purchasing Managers’ Index (PMI) manufacturing, another high-frequency indicator used widely by analysts, shows that manufacturing actually gained economic momentum in January and February compared to December 2023 levels and remained in the expansion zone.
Read here: Is India overestimating food inflation?
“CPI inflation was stable at 5.1% in February. Food inflation rose moderately, but was offset by continued slowing in core and fuel inflation. We expect the RBI to begin policy easing from Q3 24, as it awaits further signs from food prices, drawing comfort from benign core inflation and robust growth,” Rahul Bajoria, MD and head of EM Asia (ex-China) Economics, Barclays said.
