A similar easing was recorded in pulses, whose prices rose 17.7% in March, 2024, from 18.5% in February.
| Photo Credit: Sushil Kumar Verma

India’s retail inflation moderated to a ten-month low of 4.85% in March from 5.1% in February, but food inflation remained sticky at 8.52%, little changed from the 8.66% recorded in the previous month as price rise accelerated in cereals and meat, while vegetables, pulses, spices and eggs remained in double-digit inflation.

While inflation for urban consumers cooled significantly from 4.8% in February to 4.14% in March, rural consumers had it harder as they experienced a slightly higher inflation of 5.45% in March compared with 5.34% in the previous month.

This trend was visible in the extent of food price rise as well, as it accelerated from 8.3% in February to 8.6% in March for rural India, while the food inflation for urban consumers dropped from 9.2% in February to 8.35% last month.

On a month-on-month basis, there was no change in the Consumer Price Index but the food price index inched up about 0.2% and economists reckoned that the ongoing heat wave could spike food inflation in coming months. Even as crude oil prices are firming up and an inflation spike in the US may delay hopes of interest rate cuts from the Federal Reserve, sticky food inflation at home could further dampen prospects of rate cuts from India’s central bank.

While March’s inflation rate is still aloof from the bank’s stated 4% target, average retail price rise in the last quarter of 2023-24 has been 5.01%, in line with the 5% average projected by the Reserve Bank of India (RBI).

The RBI, which last week called Inflation the elephant in the room that needs to return to the forest for good, expects retail inflation to ease to an average 4.5% this year from the 5.4% clocked in 2023-24. The ongoing April to June quarter is, however, expected to see an average inflation of 4.9%, as per the RBI.

Within the food basket, vegetables’ inflation cooled marginally from the seven-month high of 30.25% in February to 28.3% last month. A similar easing was recorded in pulses, whose prices rose 17.7% in March from 18.5% in February, eggs (up 10.33% from 10.7%), sugar (up 7.25% compared with 7.5% in February.

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However, the price rise in cereals spiked to 8.4% in March from 7.6% in the previous month, and rose to 6.4% for meat and fish, from 5.2% a month earlier. Spices inflation remained over double digits at 11.4%, moderating from 13.5% in February.

Food prices continue to be under pressure with cereals, vegetables, spices and pulses seeing high inflation and the present heat wave poses an upside risk,” said Bank of Baroda economist Madan Sabnavis, who added that recent price hikes by fast moving consumer goods firms is another monitorable.

Although inflation in household goods and services, as well as health and education, eased slightly from February levels, personal care and effects prices surged at a faster pace of over 6% in March from 5.2% the previous month.

“While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Ms. Bhardwaj expects any possible interest rate cuts only in the latter half of this fiscal year, depending on monsoons’ performance, the trajectory of crude oil prices and the timing of the US Fed’s rate easing cycle.

Rating agency ICRA expects food and beverages inflation, which was 7.8% in March, to persist over 7% in April as well. “An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon this year to keep food inflation in check and anchor inflationary expectations,” its chief economist Aditi Nayar stressed.

Infrastructure and construction goods’ output continued to drive up the Index of Industrial Production (IIP), rising 14% in May.
| Photo Credit: Emmanual Yogini

India’s industrial output picked up some pace in May to grow at a three-month high rate of 5.2% compared to 4.46% in April, with electricity generation growing 0.9% after two months of contraction. 

Mining and manufacturing edged up at a swifter rate of 6.4% and 5.7%, respectively, in May, as per data from the National Statistical Office. Within manufacturing, consumer durables turned an ebbing tide for the first time in six months, with output growing 1.1% in May, compared to a 2.5% contraction in April. 

Infrastructure and construction goods’ output continued to drive up the Index of Industrial Production (IIP), rising 14% in May after a nearly 13% rise in April. Capital goods’ production also accelerated to grow 8.2% in May from 6.2% in the previous month.   

Production of primary and intermediate goods remained tepid in contrast, growing just 3.5% and 1.6%, respectively, though this was higher than April levels. Consumer non-durables’ growth slowed down from over 10% in April to 7.6% in May. 

Of the 23 manufacturing sectors tracked by the National Statistical Office, 12 sectors recorded a contraction in output in May, with apparel makers (-21%) and furniture producers (-20.5%) reporting the sharpest declines, followed by wood products (-12.7%), paper products (-8.6%) and computers and electronics (-5.7%). 

This was counter-weighed by a sharp 20.9% uptick in pharma output and a 13.4% surge in motor vehicles’ production. Other transport equipment grew 10.9%, while non-metallic mineral products and machinery and equipment makers also upped output by over 10%. 

“On the whole, it is a mixed bag, with infra-oriented sectors doing better but we still need to see consumer spending increasing,” remarked Bank of Baroda chief economist Madan Sabnavis. While the auto sector has done well thanks to post-harvest demand from rural India and the marriage season, Mr. Sabnavis said it needs to be seen if this is sustained.  

ICRA chief economist Aditi Nayar said the IIP growth may moderate to about 3%-4% in June based on high-frequency indicators such as GST e-way bills, rail freight traffic and petroleum sales which have declined from May levels.