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Below the Perspective on IIP and CPI numbers by Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services 

“The mild upside surprise on CPI inflation has come on the back of higher-than-expected food inflation, led by higher sequential momentum in eggs, meat & fish and pulses, while cereals remained under pressure despite rising materially in 2023. Vegetable inflation has also remained elevated with sequential contraction being less than the usual seasonal behaviour. Factors like delayed sowing amid patchy monsoons and consequent delayed kharif harvest have been impeding a higher correction in their prices. The truckers' strike earlier in the month may have also contributed to the disruption to supply of fruits and vegetables. Nonetheless, core disinflation has continue, with core inflation ex-intoxicants printing the lowest print in nearly four years. 

We expect the 4QFY24inflation to average ~5.0%, in line with the revised forecast of the RBI, and see core CPI inflation to average ~3.45%. However, the central bank will remain on the sidelines ahead. The RBI Governor argued in the last policy that the last mile of disinflation is the trickiest to achieve, and to that extent, the current stance should be viewed in the context of incomplete transmission and inflation still being above 4%. We have long maintained that the RBI's policy has been somewhat pegged to the Fed, specifically in the last two years, even as it formally targeted inflation. We understand that shifting debates on global narratives requires the RBI to be flexible as well. We maintain that the RBI will not precede the Fed in any policy reversal in CY24 and policy management will have to stay vigilant amid fluidity of global narratives.”

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