Retail inflation falls to 4.70% in April, industrial production index slides to 1.1% in March

New Delhi, May 12 India's retail inflation, which is measured by consumer price index (CPI), fell to 4.70 per cent in April 2023 as food prices came down. In March, it was 5.66 per cent.

Food inflation too slid to 3.84 per cent in April from 4.79 per cent in March.

According to the data released by the Ministry of Statistics and Programme Implementation, retail inflation was at a high of 7.79 per cent in April 2022, while food inflation was 8.31 per cent during the period.

This is the second consecutive month when CPI-based inflation has remained below the RBI's tolerance level, which is between 2 per cent to 6 per cent.

The index of industrial production (IIP), which shows the growth rates of different sectors, fell to 1.1 per cent in March from 5.6 per cent in February.

"The price data was collected from 1,114 urban markets and 1,181 villages," the government said in a statement.

Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd., said: "The April 2023 CPI inflation eased to an 18 month low of 4.7 per cent, benefitting from the high base as well as cooler than normal temperatures, which delayed the seasonal rise in prices of perishable items."

She noted that April 2023 was marked by above-average rainfall and lower than normal temperatures, which helped to keep prices of some vegetables in check.

"Notwithstanding the mixed month-on-month trends across food items, the YoY CPI food inflation is likely to remain subdued in May 2023 aided by the sustained high base (+ 8.0 per cent in May 2022). With El Nino expected to materialise only in the second half of the monsoon season as per the IMD, kharif sowing may not be impacted. However, any subsequent deficiency in monsoon rainfall could affect kharif yields and winter sowing, and thereby food inflation, which poses a risk to the CPI inflation trajectory," she said.

Nayar further said that although the impact of a favourable base effect related to escalation of geopolitical conflict is likely to have peaked in April 2023, ICRA foresees the CPI inflation to remain range-bound at 4.7-5 per cent in May-June 2023.

"With a dip in the CPI inflation below 5 per cent and surprisingly subdued IIP growth, we foresee a high likelihood of a pause from the MPC at its next meeting. However, a pivot to rate cuts appears quite distant.

"The timeliness and intensity of the monsoon onset would be known when the MPC meets at its next scheduled meeting in June 2023, which would feed into whether its CPI inflation projection of 5.2 per cent for FY2024 needs to be modified.

"We expect a rise in the supply of state government securities in May-June 2023, closer to the indicated amount, to prevent G-sec yields from easing meaningfully in the near term," she added.

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