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Below is Perspective on CPI and IIP numbers By Ms. Madhavi Arora, Lead Economist - Emkay Global Financial Services

“Today’s inflation shocker led by food as well as consistently higher core inflation momentum has depicted we are far from the ‘durable disinflation’ process. This upside inflation surprise comes after RBI revised down its 4QFY23 cpi Forecast by 20bps in the last MPC policy. This shows how uncertain the inflation trajectory can get, for even near-term estimates and possibly explains why they maintained the current stance of withdrawal of accommodation to keep policy flexibility ahead. This print will further strengthen RBI’s view that stickiness of core inflation could unmoor inflation expectations and lead to second-round effects in the medium term. The 4QFY23 inflation may now be possibly 50bps higher than RBI’s revised estimate and could also force the RBI to further tighten their stance ahead. Separately, available January reports so far suggest global CPI inflation is not declining as smoothly as anticipated, and markets are now eyeing tomorrow’s US CPI print to gauge further. This, combined with fluid global situation, implies that macro assessments might require frequent adjustments ahead from the policy perspective. The extent of global disruption and disinflation will also remain key to the RBI's reaction function ahead.”

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