Perspective on IIP & CPI data by Ms. Rajani Sinha, Chief Economist, CareEdge
Below the Perspective on IIP & CPI data by Ms. Rajani Sinha, Chief Economist, CareEdge
IIP Data
“Growth in India’s industrial production accelerated to a better-than-expected 5% in January from 3.5% in December. The industrial performance was majorly supported by growth in manufacturing and mining output, while electricity growth moderated. From a consumption perspective, consumer durables output showed an encouraging performance rising by 7.2%, while non-durables output disappointed with a contraction of 0.2%. A sustained and broad-based improvement in consumption remains critical, especially given the context of trailing urban demand. The latest inflation print has shown a significant moderation to 3.6% in February from 4.3% in January. The sustained easing of inflationary pressures, RBI’s policy rate cut, and lower income tax burden remain the tailwinds for consumption recovery. The improvement in consumption demand remains critical also from the standpoint of boosting the investment scenario. Moreover, infrastructure/construction and capital goods have logged a strong performance, with a 7% and 7.8% growth, respectively in January. Improving public capex also bodes well for the performance in these categories.”
CPI Data
‘’The CPI inflation moderated notably to 3.6% in February 2025, marking the lowest reading in the last seven months supported by sustained easing in food and beverages inflation. Vegetable inflation which had been a significant contributor to the overall inflation slipped into deflation (at -1.1%), reversing the trend of high inflation seen in the past months. Additionally, deflation in pulses (at -0.4% Vs 2.6% last month) also supported the lower food inflation reading. On the other hand, double-digit inflation in edible oils and fruits somewhat capped the moderation in overall food inflation.
Agricultural production is seen at a record high in 2024-25 as per the Second Advance Estimate. Encouraging prospects for the agricultural production, arrival of fresh Rabi harvest and comfortable reservoir levels are positives for food inflation. The prices of edible oils remain a key monitorable, especially given the contraction in sowing of oil seeds, an increase in global edible oil prices and import dependency in this category. Food inflation is likely to remain benign in the coming months, however, we need to be cautious of any weather-related disruptions.
Going ahead, we project CPI inflation to stay around the 4% levels supported by comfortable core inflation and moderating food inflation. The trajectory of global commodity prices remains a monitorable given the overhang of uncertain trade policies and geopolitical tensions. On the monetary policy front, the below potential growth in the recent quarters and comfort on the inflation front support the possibility of a 25-bps policy rate cut in the upcoming April MPC meeting. Cumulatively, we expect a 25-50 bps reduction in the policy rate in FY26 contingent upon the evolving growth-inflation dynamics in the economy’’.
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