Data released Thursday by the National Statistics Office (NSO) indicated that retail inflation dropped to its lowest rate since September at 5.48 percent, after reaching its 14 month peak of 6.21 percent in October due to reduced prices for foods such as vegetables.
Food inflation measured by Consumer Food Price Index, (CFPI), saw its rate fall from double-digit levels and an all-time 15 month high of 10.87 percent in October to 9.04 percent in November.
NSO also released data showing India's industrial output measured by the Index of Industrial Production had seen an upswing from September's 3.1 per cent to 3.5% growth over November due to an improvement in manufacturing, mining and electricity sectors.
Consumer Price Index (Combined) inflation rates dropped below the upper limit of RBI's midterm inflation goal in November after surpassing 6 per cent the month prior, yet still exceeded its baseline level by over three percentage points for another consecutive monthly.
Experts noted that with inflation moderated, new RBI governor Sanjay Malhotra who assumed office on Wednesday will have greater room to cut rates at February's Monetary Meeting amid fears over slowing economic growth.
If inflation moderates in the coming months, the Monetary Policy Committee (MPC) can reduce its policy rate accordingly. We anticipate that headline inflation rate will fall below 5% by Q4 of FY25 due to reduced food inflation; then MPC could consider cutting its policy rate by 25 bp at February meeting (we forecast 50-75 basis point reduction by 2025), said Rajani Sinha of CareEdge Ratings.
Food and beverage items comprise 45.86% of the CPI (Combined), accounting for an inflation rate in November of 8.200% - down from 9.69% in October. Vegetable inflation decreased to 29.33 percent while fruits decreased from 8.43 points in earlier months to 7.68.
Cereal inflation dropped slightly to 6.888% in November from 6.94% in October; pulse inflation decreased to 5.41% from 7.43%. Oils and fats inflation reached double-digit levels of 13.28 percent versus 9.51 percent seen previously, while housing inflation rates marginally rose from 2.81 to 2.87 percent during November.
Miscellaneous services inflation has also eased off slightly from 4.32 to 4.26 percent in November, but 10.42 percent personal care and effect inflation remains double-digits. Meanwhile, core inflation -- including non-food and non-fuel index components such as core inflation rate -- remained nearly constant at 3.6% versus 3.7% seen previously.
Experts stated that having a higher base will help lower inflation rates in the future, with sowing progress being critical in controlling it. Furthermore, experts will closely track edible oil inflation due to rising global prices and recent increases in import duty.
Paras Jassir, Senior Economist with India Ratings & Research stated, "we anticipate inflation to decrease by approximately 5 percent by December 2024 if the base effect for pulses, fruit and vegetables increases," though edible oils, personal care & effects products or any other challenges may remain."
Inflation data by region revealed rural inflation to have declined to 5.95 percent from 6.68 percent in October and urban inflation to have moderated from 5.62 to 4.83 percent; food inflation rates saw a marked reduction from 10.69% to 9.10% across both areas, while urban areas experienced rates as low as 8.74% - both reductions compared with rates as high as 11.09% seen previously.
Seven out of the 22 states/Union Territories with inflation rates above the headline rate (5.48%) have inflation rates above this benchmark; Chhattisgarh had the highest inflation rate (8.39%) followed by Bihar (7.55%) and Odisha(6.78%). Delhi experienced 2.65 percent.
"State-level inflation figures vary considerably, from 7.6 percent in Bihar to 2.7% in Delhi with food prices being more expensive in these states; Odisha Madhya Pradesh Kerala and Bihar also recorded over-6% inflation," stated Madan Sabnavis of Bank of Baroda.
India's industrial output saw an uptick of 3.5% compared to 3.1% the prior month, as industrial growth between April and October totalled 4.0%, down from 7.0% previously.
The manufacturing sector, comprising 776.6% of IIP weight, experienced an increase of 4.1 percent versus 3.9 percent in September and 10.6 percentage points during the previous period. Mining production increased to 0.9 percent versus 0.2 percent growth seen previously while electricity output also saw growth at 2 percent versus an increase of 0.5 percent seen previously - still lower than its 20.4 growth during previous year period.
According to use-based classification, primary goods production increased 2.6% versus 1.8% in September; capital goods investment sentiment index fell from 3.6% in September to 3.16% in October; this compares with 36% growth seen previously and 21.7% year over year growth rate for September.
On the consumption goods front, both consumer durables (consumer durables) and non-durables (non-durables) output experienced strong increases despite starting from high bases. Consumer durables output, which measures demand for consumption goods, increased by 5.9 per cent year-on-year compared to September levels (5.65 percent growth).
Consumer non-durables production increased by 2.7% year over year in October compared to 2.27 in September; during the same month last year it had grown 9.3%.
"The acceleration in consumer-goods production growth due to festive demands in October 2024 (6.2%) despite higher prices is an encouraging indicator for consumption demand in an economy. Rural real wages have seen steady improvements for some time now and these contributions are gradually driving an increase in consumption demand," Jasrai commented. Rabi sowing prospects could help maintain consumption demand well into 2HFY25," according to Jasrai.
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