India's CPI At 4.85%; IIP Robust At 5.7%; RBI To Remain Cautious: Nirmal Bang

Nirmal Bang Report

Consumer Price Inflation stood at 4.85% in March 2024 (our estimate: 5.08%; Bloomberg consensus: 4.9%), down from 5.1% in Feb-24. The deviation from our estimate was due to lower than anticipated fuel and light inflation (led by lower subsidised LPG prices).

Food and beverage inflation stood at 7.68% in March-24 (estimate: 7.72%), just a notch lower from 7.8% in Feb-24. Core inflation stood at 3.25% (in line with estimate), down from 3.4% in Feb-24. Underlying data points to some worrying dynamics with moderating urban inflation and rising rural inflation. The divergent trends suggest continued challenges for recovery at the “bottom of the pyramid”.

While core inflation continues to moderate, sticky food inflation along with resilient growth and delayed rate cuts by the U.S. Federal Reserve will keep the Reserve Bank of India cautious.

We are penciling in 50 basis points rate cuts by the RBI in H2 FY25. We believe rate cuts are likely to be led by the ECB followed by the U.S. Fed and finally the RBI.

Growth in the Index of industrial production was robust at 5.7% YoY in Feb-24 (our estimate: 5.9%; Bloomberg consensus: 6%) versus 4.1% YoY in Jan-24. Growth was broad-based, with 19 of 23 manufacturing sectors in the positive territory.

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