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Perspective on IIP & CPI Data by Mr. Nikhil Gupta, Chief Economist, MOFSL Group

Headline CPI at 25-month low in May'23

Headline CPI-inflation at just 4.3% YoY in May'23, in line with the BMBG consensus but slightly lower than our forecast (of 4.5%). Details suggest broad-based deceleration.

It was largely driven by food and imported items. Imported deflation was 4.2% YoY and food inflation was 18-month low of 2.9%

Core inflation was at 25-month low of 5.2% YoY

Core services inflation dropped to 35-month low of 4.2% YoY

Details of 299 components suggest that the share of 6%+ basket was down to 45% last month, the lowest in 11 months

CPI ex veggies was is at 37-month low of 5.1%

Overall, inflation data was good. We expect it to stay at ~4.5% for the next 3 months, before dipping towards 4% in Sep'23. It doesn't mean a rate cut is imminent but no more rate hikes in India.

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