India's CPI Inflation At 10-Month Low In March, Industrial Output At Four-Month High In Feb: Motilal Oswal

Motilal Oswal Report

Headline Consumer price index inflation eased to a 10-month low of 4.9% YoY in March 2024 versus 5.1% in February 2024, mainly led by a contraction in prices of fuel and light components (all-time low of -3.2% in March-24 versus -0.8% in Feb-24) and lower core inflation, which was partly offset by high food inflation. This implies that inflation stood at 5.4% in FY24, the lowest in four years. The inflation number was in line with our expectation and Bloomberg consensus of 4.9%.

Food inflation came in at 8.5% YoY in March-24 versus 8.6% in Feb-24. Details suggest that high food inflation was mainly driven by prices of cereals, which rose to a three-month high of 8.4% in March-24 versus 7.7% in Feb-24.

At the same time, prices of vegetables (6% weight) and protein-based items (eggs, meat and fish) also remained firm. Inflation in meat and fish (3.6% weight) came in at a 21-month high of 6.4% in March-24 (versus 5.2% in Feb-24). Additionally, inflation in pulses continued to be sticky in double digits.

On the other hand, inflation in spices came down to a 21-month low of 11.4% in March-24 from its peak of 23.1% in Aug-23 and 13.5% in Feb-24.

Standard core inflation (excluding food & energy) remained unchanged at 3.5% YoY in March-24 (versus 3.5% in Feb-24).

Notably, the prices of fuel and light items contracted 3.2% YoY in March-24 versus a contraction of 0.8% in Feb-24.

Index of Industrial Production growth accelerated to 5.7% YoY in Feb-24 (versus 4.1% in January 2024), highest in four months. The acceleration in growth was broad-based. The number was slightly lower than the Bloomberg consensus of 6% and better than our forecast of 5.2%.

The main driver of the better-than-expected industrial output growth was the mining sector, which grew 8% YoY in Feb-24. However, production was weaker than expected in the capital goods and consumer non-durable sectors, while it was better in the construction and consumer durable sectors. During Apr-Feb-24, industrial output grew 6%.

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