India’s Economic Update: Retail Inflation Dips to 10-Month Low, IIP Surges

India’s retail inflation dropped to a 10-month low of 4.85% in March, aligning with the RBI’s tolerance band of 2-6%. Meanwhile, industrial production (IIP) saw a significant rise, hitting a four-month high at 5.7% in February.

Inflation Trends: ‘The Elephant in the Room’

Governor’s Perspective

Reserve Bank of India (RBI) Governor Shaktikanta Das addressed inflation as the primary challenge, noting its gradual decline but persistent pressure from service prices.

Recent Figures

Headline inflation for January-February 2024 decreased to 5.1% from December’s 5.7%, with food prices being a significant contributor despite a deflationary trend in fuel prices.

Food and Fuel Dynamics

Food inflation surged to 7.8% in February, driven by factors like vegetables, eggs, meat, and fish, while fuel prices sustained a deflationary trend. Core CPI, excluding food and fuel, dropped to 3.4% in February, reflecting a decline in both goods and services inflation.

Monetary Policy Outlook

The MPC maintained its inflation forecast for the fiscal year at 4.5%, contingent on factors like a normal monsoon, despite concerns over rising crude oil prices and supply chain disruptions due to the Red Sea crisis.

Piyush Shukla

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