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Below is Perspective on IIP numbers By Mr. Vivek Rathi, Director Research, Knight Frank India.

At 5.7%, consumer headline inflation continues to remain below 6% for the second consecutive month. The softening inflation is emerging from broad based price decline in the food basket which has a weightage of 46% in the overall inflation. Barring food prices, the price pressures in the non-food category continues to persist. Despite a sharp drop in the global commodity prices and crude oil having been corrected by 33% since the peak in Jun 2022, and an increase in share of crude oil imports from Russia at cheaper prices, fuel prices inched up to 11% in Dec 2022.

Although, at the wholesale level, inflation has significantly reduced, the quantum of reduction is not transferred into consumer prices yet, as core inflation continues to remain sticky at around 6%. Continued depreciation of Rupee against USD transmitting into import inflation has added pressure to domestic prices. In the coming months, a favourable base along with seasonal softening of food basket will keep the inflation statistically low. However, price pressures would continue to persist in non-food categories emerging from scope of increase in commodity prices led by demand revival in China, as it emerges out of zero covid policy, and depreciating rupee. So far, to control inflation, the RBI has increased its key policy rate by 225bps in this cycle. The upcoming rate hikes would continue to remain less aggressive as guided by moderation in consumer inflation level. Housing sales in the top 8 cities grew to a 9 year high of 312,000 units in 2022. The less aggressive policy rate hikes will keep home buyer affordability amenable and help maintain consumer enthusiasm towards homebuying”.

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