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Below is perspective on CPI data for the month of December and IIP data for the month of November ‘2021 By Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services

It is very clear now that GDP growth took a serious hit in Oct-Nov'21 and thus, 3QFY22. I am confident that the consensus of 6.3% YoY growth forecast will be revised down and 5-5.5% looks more likely.

Nov'21 IIP grew only 1.4% YoY, half the consensus of 2.8%. Excluding transport sector, IIP grew just 2.4%. This is on the base of a decline of 1.7% YoY in Nov'20 and this is before the new COVID variant.

For Dec'21, the growth seems to be have remained weak. Fuel sales grew marginally, freight traffic growth was as weak as in Nov'21, tractor sales fell sharply and power generation growth was also as weak. On the contrary, e-way registrations increased and toll collections picked up.

Separately, retail inflation picked up to 5.6% YoY last month, slightly lower than the consensus of 5.8% (our forecast of 5.7%). Core inflation was 6.2%, as per our expectations.

The combination of weakening growth, in-line inflation and Omicron fears may potentially delay the monetary policy normalization in India. The Union Budget is the only Big event before the next MPC. Though a reverse repo rate hike is still on the table in Feb'22, it may be postponed to Apr'22 as well.

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