The macro data in the month of April gave mixed signals as the CPI inflation for the month of March eased further to 4.28% from 4.48% in the previous month but the IIP growth slowed. The IIP growth in the month of January was recorded to 74.%, which slumped to 7.1% in the month of February. However, both macro indicators showed contradictory results as expected. According to ET Now’s poll, CPI was expected to be 4.1% while IIP was expected to be 7%.
The March CPI inflation eased further on the back of lower food and vegetable prices. The food inflation in the month of March fell sharply from 3.26% recorded in February to 2.81% and the food & beverage inflation was down from 3.38% to 3.08%. The vegetable inflation witnessed the sharpest fall from 17.57% to 11.7%.
While inflation at 4.28% continues to remain higher than Reserve Bank of India’s 4% target. In its first bi-monthly policy meeting of the fiscal year 2018-19, the RBI took a less hawkish stance while maintaining the status quo at 6%. However, analysts predict that despite the slowdown, inflationary pressures may come back.
“Despite the positive news on the food inflation front, we believe that inflationary pressures remain tilted to the upside and are likely to hover around the 5% mark in FY 2018-19. Expected risks may arise from fiscal slippage, higher input costs and MSP hikes while financial sector volatility with respect to the normalization policy in the US may cause further tension,” Anis Chakravarty, Lead Economist, Deloitte India.
Meanwhile, the IIP growth in the month of January was revised from 7.5% recorded earlier to 7.4%. Despite a lower IIP growth, the growth in infrastructure sector was nearly doubled to 12.6% in February from 6.8% in January. Despite the little showdown, Richa Gupta, Senior Economist, Deloitte India has said that factory output remains healthy. “The factory output data still remains significantly healthy and production has largely marked a broad-based improvement for the fourth consecutive month,” Richa Gupta said.
“Production prints reflected some slowdown over last month’s surprise gain, however, the lower print has likely come on the back of base impact and considerable deceleration in electricity,” she added.