Retail Inflation Eases To 5.66% In March, Comes Under RBI's Comfort Zone; IIP Rises 5.6% In February

India’s CPI inflation in March 2023 declined to 5.66 per cent, according to latest official data released on Wednesday. With this, the retail inflation has come under the RBI’s tolerance limit of 2-6 per cent. India’s industrial production based on IIP also rose 5.6 per cent in February 2023.

The retail inflation, based on Consumer Price Index (CPI), had stood at 6.44 per cent in February 2023 and 6.95 per cent in March 2022.

According to the National Statistical Office, the inflation in the food basket was 4.79 per cent in March, as against 5.95 per cent in February and 7.68 per cent in the year-ago period.

The retail inflation in both rural and urban areas eased in March 2023, to 5.51 per cent and 5.89 per cent, respectively.

The inflation rose from 5.7 per cent in December 2022 to 6.4 per cent in February 2023 on the back of higher inflation in cereals, milk and fruits and slower deflation in vegetables prices.

Reserve Bank of India has projected the CPI inflation at 5.2 per cent for FY2023-24, with 5.1 per cent in Q1, 5.4 per cent in Q2, 5.4 per cent in Q3, and 5.2 per cent in Q4, and risks evenly balanced.

V K Vijayakumar, chief investment strategist at Geojit FInancial Services, said, “The MPC has received an endorsement of their decision to pause the rate hike with the March CPI inflation slowing down to 5.66 per cent in March from 6.44 per cent in February. The RBI’s projection of 5.2 per cent CPI inflation for FY 24 appears to be on track.”

He added that core inflation for March has also declined to 5.8 per cent from 6.1 per cent in February. This is good news from the market perspective. “Bulls can take the rally forward on the assumption that we are at the peak of this rate hiking cycle.”

Aditi Naya, chief economist and head (research and outreach) at ICRA, said,

“After a gap of two months, the CPI inflation reverted below the 6 per cent upper threshold of the MPC’s 2-6 per cent range to 5.66 per cent in March 2023, slightly lower than our expectations, bringing the average for Q4 FY2023 to 6.2 per cent. The sequential decline in the CPI inflation in March 2023 was broad-based across the major sub-indices, with only housing reporting an uptick.”

Industrial Production Rises 5.6%

India’s industrial production rose 5.6 per cent in February 2023, according to official data released on Wednesday. Factory output based on the Index of Industrial Production (IIP) grew 1.2 per cent in February 2022.

The data released by the National Statistical Office (NSO) showed that the manufacturing sector’s output increased 5.3 per cent in February 2023. Mining output rose 4.6 per cent and power generation surged 8.2 per cent during the month under review.

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