Consumer price index (CPI) inflation eased to a five-month low of 4.9% in March from 5.1% in February. While core inflation declined to a record low of 3.3%, fuel deflated 3.2% on the back of lower domestic fuel prices.
The worry, though, remains on persistently high food inflation, at 8.5%. Higher cereals inflation, erratic vegetable inflation and elevated pulses inflation are a cause of concern given the India Meteorological Department’s (IMD) prediction of higher-than-normal temperatures between April and June.
We expect CPI inflation to average 4.5% this fiscal. Intensification/persistence of geopolitical concerns and weather shocks, if any, pose an upside risk to this call.The Index of Industrial Production (IIP) increased to 5.7% on-year in February from 4.1% in January, boosted by healthy performance in both consumption and industrial sectors.
The increase in manufacturing IIP (5.0% on-year in February vs 3,6% the previous month) was led by increasing output growth in electrical equipment (10.0% vs 3.1%), basic metals (8.8% vs 7.3%), coke and refined petroleum products (4.9% vs -2.2%) as well as textiles (3.7% vs 3.1%)
