Retail inflation eases to 4.25% in May; April IIP rises 4.2% vs 1.1% in Mar

It was for the second month in a row that retail inflation remained within the RBI's comfort zone of below six per cent

India's consumer price index (CPI)-based inflation fell to 4.25 per cent in May, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed on Monday. In the month of April, the retail inflation was 4.7 per cent.

The food inflation also eased to 2.91 per cent in April. It was 3.84 per cent in the month of April.

April's inflation numbers were the lowest in 18 months. It was for the second month in a row that retail inflation remained within the Reserve Bank of India (RBI)'s comfort zone of below six per cent.

The RBI has projected the CPI-based inflation at 5.2 per cent for FY24, with 5.1 per cent in Q1, 5.4 per cent in Q2, 5.4 per cent in Q3, and 5.2 per cent in Q4, and risks evenly balanced.

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities said, "May CPI-based inflation at 4.25 per cent was lower than expectations and benefitted from a favourable base effect as well as a further fall in food inflation. Food inflation benefitted from a sequential fall in prices of fruits and oils even as prices of eggs, meat, milk, vegetables, and pulses continued to increase partly reflecting seasonal impact too."

Rajani Sinha, Chief Economist, CareEdge Ratings said, "The CPI-based inflation came broadly on expected lines supported by a favourable base and softer increase in food prices. Despite the moderation, cereals inflation continued in double digits whereas,milk, pulses, sugar and spice inflation firmed due to limited supply. Going ahead, a marginal uptick in inflation print could be seen as the support from favourable base wanes".

The Index of Industrial Production (IIP) rose 4.2 per cent in April, compared with 1.1 per cent in March.
 

Power generation declined 1.1 per cent in April 2023 compared to a growth of 11.8 per cent.

Mining output, however, rose by 5.1 per cent during the month under review against a growth of 8.4 in the year-ago period.

According use-based classification, the capital goods segment recorded a 6.2 per cent growth in April compared to a 12 per cent expansion a year ago.

"Industrial output surprised on the upside with a 4.2 per cent growth in April, rebounding from subdued growth in the previous month. The improvement in manufacturing sector and robust growth in the construction sector is encouraging. However, the continued weakness in external demand remains concerning, as reflected in the muted performance of export-intensive sectors such as textiles, wearing apparel, leather & related products", Sinha further said.

(With inputs from agencies)