Economy     

Published: June 15, 2024
Updated: June 15, 2024

Retail inflation at 12-month low

Retail inflation in India has reached a 12-month low of 4.75% in May 2024, according to the latest data from the Ministry of Statistics and Programme Implementation. This marks a slight decline from the 4.83% recorded in April 2024. The headline inflation rate has remained under 5% for three consecutive months since March 2024.

The Consumer Price Index (CPI) inflation for May 2024 shows a year-on-year rate of 4.75%. This breaks down further into rural inflation at 5.28% and urban inflation at 4.15%. The data indicates a continuous moderation in headline inflation from 5.1% in February to 4.8% in April.

Inflation within the food basket stood at 8.69% in May, marginally lower than the 8.70% in April. Despite the high level of food inflation, it remained unchanged compared to the previous month.

The Reserve Bank of India (RBI) has been tasked with keeping CPI inflation at 4%, with a margin of 2% on either side. Earlier this month, the RBI projected CPI inflation for 2024-25 at 4.5%, forecasting 4.9% in Q1, 3.8% in Q2, 4.6% in Q3, and 4.5% in Q4.

I.I.P. GROWS

India’s industrial production, measured by the Index of Industrial Production (IIP), grew by 5% in April 2024. This is an improvement from the 4.6% growth in April 2023. The mining, manufacturing, and electricity sectors saw growth rates of 6.7%, 3.9%, and 10.2% respectively.

Within the manufacturing sector, notable growth was observed in

• % Basic metals (8.1%).
• % Coke and refined petroleum products (4.9%).
• % Motor vehicles, trailers, and semi-trailers (11.4%).

The IIP for April 2024, with a base year of 2011-12, stands at 147.7, compared to 140.7 in April 2023. The indices for different categories are:

1. Primary Goods: 152.2

2. Capital Goods: 95..3

3. Intermediate Goods: 156.9

4. Infrastructure/Construction Goods: 183.3

5. Consumer Durables: 118.7

6. Consumer Non-Durables: 151.0

Aditi Nayar, Chief Economist at ICRA Ltd, noted that the unexpected ease in headline CPI inflation was driven by a lower-than-anticipated print for the food and beverages group. She highlighted that although food and beverages inflation remained high at 7.9%, several subgroups saw a cooling in their inflation rates.

MONSOON FACTOR

Murthy Nagarajan, Head of Fixed Income at Tata Asset Management, commented that the CPI inflation figure of 4.75% was slightly lower than market expectations. He emphasized the need for a good and normal monsoon distribution to help reduce food inflation further, given the rising global food prices.

The drop in retail inflation to a 12-month low in May 2024 is a positive sign for the Indian economy, indicating potential stabilization. However, high food inflation and external factors such as global food prices and monsoon patterns will continue to play a crucial role in the country’s inflation dynamics.