India CPI Inflation Data Highlights: Retail inflation hits 14-month high

We will now wrap the blog. Good night, folks!

“From 7.2% GDP, a downward revision is likely, but maybe they retain the golden 7% mark, because after the second quarter weak show third and fourth quarter, we may get back to the 7% threshold on GDP growth numbers.

But I want to hold on to my FY25 growth forecast, which is tracking up below 7% it’s closer towards 6.8-6.9% while the RBI may stick to 7%. On inflation, we are at 4.7% but I don’t think that’s going to be a big worry for the RBI, because the last quarter number for us is still tracking close to RBI’s 4.2%.”

“With this CPI print and as most panellists said we will be significantly higher as compared to RBI projection on CPI. So, I think a rate cut in December is ruled out. February onwards we see a very high probability of a rate cut in every policy. So February is where I pencil in the first-rate cut.”

“The IIP number is broadly in line with what we were anticipating. A lot of the growth that we are seeing in IIP was stocking up ahead of the festive season, and some of the disruptions that we saw due to rainfall in August, some of that easing off.

In terms of GDP growth, across a host of high-frequency indicators, it is visible that things have slowed down in Q2, and we are as of now working with a number of close to 6.6% for Q2 in terms of GDP growth.”

“For GDP we are at 6.4-6.5% in fact, GVA may slip below the 6% mark in our view for this quarter.”

“3.1% IIP implies that IIP growth was only 2.6% in the quarter ending September. Manufacturing sector growth was 3.1% much lower than above 4% that we have seen in the previous quarters, and not only IIP, if we look at the company results that have been coming out, especially consumption stocks and generally, the growth has been coming off.

So we were very clear, and we continue to maintain our view that manufacturing growth within GVA will come off in Q2 and I think Q2 GVA data, or GDP data, will be much weaker than what the market or the RBI has been anticipating. So we expect GDP growth at close to 6.2% and GVA growth of 6.4% for Q2 which is much weaker than the market consensus and RBI forecast.”

“I think probably we are more looking at what’s happening on US bond yields. Obviously, there is a near-term worry on Indian bonds also, because in the last 30 to 45 days, our bond markets haven’t reacted to the up move in US yields. US yields from its bottom are up now 60-70 basis.

Our bond markets haven’t moved by more than 3-4 basis. So I think some pressure on currency. It’s been now 45 days, and FPIs have been selling in the debt market in India after nine months of inflows. So near term, we can see some uptick, but favourable demand-supply dynamics on bond markets.

And I’m sure everyone will be tracking US inflation tomorrow and it will not lead to any major sell-off in our yields. Our yields will continue to trade in the band of 6.75% to 6.90% in the near term.”

“The CPI inflation worryingly soared further to a 14-month high of 6.2% in October 2024, breaching the upper limit of the MPC’s medium-term target range of 2-6%. The sequential hardening in inflation was largely led by the food and beverages segment, followed by a mild uptick in the core items.

The food and beverages inflation surged to an eye-watering 9.7% in October 2024 from 8.4% in the previous month, amid an uptick in seven of the 12 food groups. Vegetables inflation hardened to a 57-month high of 42.2% from 36.0% in September 2024, which weighed on the food and beverages and, consequently, the headline inflation prints in the month. Excluding vegetables, both these prints were much more benign, at 4.3% and 3.6%, respectively, albeit slightly higher than the readings seen in September 2024.

The all-India reservoir storage stood at 86% of the live capacity at full reservoir level (FRL) as of November 7, 2024, which is likely to support rabi sowing in the ongoing season. However, concerns related to the low inventory levels of di-ammonium phosphate (DAP) and reservoir storage in some states like Punjab may impede the progress of sowing and thus are key monitorables for the rabi season.

With the CPI inflation breaching the 6% mark in October 2024 and expected to exceed the MPC’s estimate for Q3 FY2025 by at least 60-70 bps, a rate cut in the December 2024 policy review appears ruled out, in spite of our projection of a sub-7% GDP growth print for Q2 FY2025. We anticipate that a shallow rate cut cycle of 50 bps may commence in February 2025 or later.”

“For the last 3-4 months we are seeing inflation picking up. So definitely the RBI would be revising upwards its inflation forecast for not only Q2, but also for Q3 and probably for the full year as well. I hope they do it because that seems to be a more realistic scenario.

Inflation at 6.2% is definitely higher than what we were expecting and it was higher than the market consensus as well. It is not only due to food, food is also higher than expected but the core inflation also is higher than expected. So it is much more broad-based than putting the blame only on vegetables. So for the full year, we expect inflation to be around 4.8-4.9%.”

“This inflation print at 6.2% is closer to what we were anticipating at 6.1%. As you highlighted, food inflation is the major culprit. We’ve been talking about the fact that core inflation is also now bottoming out, and that’s visible in this particular print.

That being said, I think this is a one-off. I think from next month onward, you should start seeing inflation move back below 6% and once we have the kharif production come into the market, and the winter season sets in, inflation should move back below 5% so we are expecting that for Q3 we are going to see an average of 5.4% which is considerably higher than what the RBI last projected at 4.8%. For Q4 we are still expecting close to 4.3-4.4% average inflation.”

“The inflation for Oct’24 was significantly higher than our estimates. The rise was driven by food products, particularly vegetables rising above 42% year-on-year. While the components of the core saw some uptick, the current inflation trajectory is guided by food inflation.

The numbers for the last 2 months remaining above the RBI’s target level of 4% have further receded the rate cut expectations for next month. This is consistent with our view that the rate cuts will begin only at the beginning of 2025. We believe that the good monsoon and better rabi harvest shall result in lower food price volatility in the next quarter.”

September IIP At 3.1% Vs -0.1% (MoM)
September Mining Growth At 0.2% Vs -4.3% (MoM)
September Manufacturing Growth At 3.9% Vs 1% (MoM)
September Electricity Growth At 0.5% Vs -3.7% (MoM)
September Primary Goods Growth At 1.8% Vs -2.6% (MoM)
September Capital Goods Growth At 2.8% Vs 0.7% (MoM)
September Infra Goods Growth At 3.3% Vs 1.9% (MoM)
September Cons Durables Growth At 6.5% Vs 5.2% (MoM)
Cons Non-Durables Growth At 2% Vs -4.5% (MoM)

October CPI Inflation At 6.21% Vs CNBC-TV18 Poll Of 5.9%
October CPI Inflation At 6.21% Vs 5.49% (MoM)
October Food Inflation At 10.87% Vs CNBC-TV18 Poll Of 9.97%
October Food Inflation At 10.87% Vs 9.24% (MoM)
October Rural Inflation At 6.68% Vs 5.87% (MoM)
October Urban Inflation At 5.62% Vs 5.05% (MoM)
October Vegetables Inflation At 42.18% Vs 35.99% (MoM)
October Pulses Inflation At 7.43%  Vs 9.81% (MoM)
October Fuel & Light Inflation At -1.61% Vs -1.39% (MoM)
October Housing Inflation At 2.82%  Vs 2.78% (MoM)
October Clothing & Footwear Inflation At 2.70% Vs 2.71% (MoM)
October Core CPI Inflation At 3.7% Vs 3.5% (MoM)
October Core CPI Inflation At 3.7% Vs CNBC-TV18 Poll Of 3.55%

India’s October CPI inflation rate rose to 6.21%, led by a 10.87% food inflation surge, exceeding CNBC-TV18’s poll projection of 6%, as urban and rural inflation remained elevated. Read more here.

The National Statistics Office data showed that inflation in the food basket rose to 10.87% in October from 9.24% in September and 6.61% in the year-ago month.

Retail inflation rose to 6.21% in October from 5.49% in the preceding month mainly due to higher food prices, breaching the Reserve Bank of India’s (RBI’s) upper tolerance level.

The consumer price index-based inflation was 4.87% in October 2023.

During the month of October, 2024 significant decline in inflation is observed in Pulses & products, Eggs, Sugar & confectionery and spices subgroup. High food inflation in October, 2024 is mainly due to increase in inflation of vegetables, fruits and oils and fats.

Year-on-year inflation rate based on All India Consumer Price Index (CPI) for the month of October, 2024 is 6.21%. Corresponding inflation rates for rural and urban are 6.68%and5.62%, respectively.

Retail inflation shoots up 6.21% in October compared to 5.49% in September, shows government data.

Index of Industrial Production (IIP) rises 3.1% in September, shows government data.

Currently, CPI and IIP data are released on the 12th of each month, with CPI postponed to the next working day if the 12th is a holiday, and IIP data moved to the previous working day if the 12th falls on a holiday.

The Ministry of Statistics and Programme Implementation (MoSPI) announced that it will advance the release time of macroeconomic data for the Consumer Price Index (CPI) and Index of Industrial Production (IIP) by 1.5 hours, from 5.30 pm to 4 pm.