New Delhi: With higher food prices, India’s headline retail inflation rose to a four-month high of 5.69 per cent in December 2023 against 5.55 per cent in the previous month of November, while it was 5.72 per cent in December 2022. Besides, India’s industrial production growth decelerated to an 8-month low of 2.4 per cent in November, mainly due to poor performance in the manufacturing and mining sector among others, two separate government data showed on Friday.
As far as retail inflation is concerned, food prices, which account for about half of the inflation basket, rose in November 2023 and remained elevated last month, largely led by vegetable prices and household staples. Despite inching up marginally, retail inflation still continued to remain in the Reserve Bank of India’s (RBI) tolerance range of 2-6 per cent as the government has tasked the central bank to ensure retail inflation stays in the target range.
As per the data released by the National Statistical Office (NSO), retail inflation in the food basket was at 9.53 per cent in December 2023, up from 8.7 per cent in the preceding month and 4.9 per cent in the year-ago month. “The vegetable inflation surged to 27.64 per cent in December from 17.7 per cent in November. On the other hand, fuel and light inflation contracted by (-) 0.99 per cent, compared to (-) 0.77 per cent in the preceding month,” the NSO data showed.
RBI governor Shaktikanta Das has highlighted the successful disinflation through monetary policy actions, saying that there is a need to closely monitor the trajectory of food inflation. “The influence of food prices on the inflation outlook and expressed concern about the persistently high food inflation in India, especially in the lead-up to the upcoming general elections,” Das had acknowledged recently.
However, economists and analysts feel that given the unfavourable base of last year, the reading will be taken positively by the investor community. “On a sequential basis, the consumer price index declined 0.3 per cent. “Food prices came down on a sequential basis but remained high when compared to last year and it came in at 9.5 per cent year-on-year (YoY) as vegetables and pulses saw more than 20 per cent YoY inflation. Prices of cereals also rose 10 per cent YoY. Nevertheless, these categories have seen a moderation in prices when compared to November levels,” said TIW Capital CEO Mohit Ralhan.
“Food inflation should head lower as policymakers have put in export controls on key commodities. Besides, more kharif output reaching the markets will also ease price pressures. Over the next few months, overall inflationary pressures should moderate further, which will give RBI headroom to consider global factors for any monetary easing,” Ralhan added.
“Although the CPI inflation inched up to a four-month high of 5.7 per cent in December 2023, it was comfortably below our forecast of 5.9 per cent, amid a lower-than-expected rise in food inflation as well as the sharper-than-expected moderation in the miscellaneous segment. The sequential up-tick in the headline CPI inflation in December 2023 was entirely led by the food and beverages segment, with all the other sub-groups either reporting an easing or similar YoY prints in December 2023 compared to the previous month,” said Aditi Nayar, chief economist, (head-research and outreach), ICRA Ltd.
Meanwhile, data released by the Ministry of Statistics and programme implementation, showed that the growth in India’s industrial output or index of industrial production (IIP) slumped to 2.4 per cent in November from October’s 16-month high of 11.6 per cent. “However, the IIP grew by 6.4 per cent in April-November 2023 compared to a 5.6 per cent expansion a year ago,” it showed.
At 2.4 per cent, the latest industrial growth figure is the lowest in eight months and is below economists’ expectations of 3.5 per cent. “India’s IIP grows by 2.4 per cent in November 2023. The manufacturing sector’s output grew only by 1.2 per cent in November 2023, while mining production rose 6.8 per cent during the month under review, and power output rose 5.8 per cent as well,” the data showed.
