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Below the Perspective on CPI & IIP data by Mr. Nikhil Gupta, Chief Economist, MOFSL Group

As expected, India's inflation was at 10-month low of 4.85% YoY in Mar'24 (BMBG consensus and our forecast of 4.9%), implying that inflation was 5.4% in FY24, the lowest in four years. Key details are as follows:

1) Core inflation was unchanged at 3.3% last month, while food inflation was 8.5% vs. 8.6% in Feb'24

2) Services inflation eased to 3%, with further easing in 'housing' inflation.

3) As much as 72% of CPI basket posted an inflation of <=5% last month, compared to 60% in late 2023, but the same as in 2019.

-- Separately, IIP grew 5.8% YoY in Feb'24, slightly lower than BMBG consensus of 6% and better than our forecast of 5.2%. The major reason for better-than-our forecast was mining sector, which grew 8% YoY in Feb'24. However, capital goods and consumer non-durable production was weaker than expected, while construction and consumer durable was better.

Overall, inflation and IIP data was in line with expectations, which doesn't imply any major impact for monetary/fiscal policy. We expect CPI to average ~4.5% next year and a rate cut may happen only in late FY25.

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