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Below the Quote on basis IIP and CPI Data by Mr. Arsh Mogre, Economist Institutional Equities, PL Capital - Prabhudas Lilladher

IIP: 

“India’s Index of Industrial Production (IIP) rose by 3.5% in October 2024, marginally higher than September’s 3.1%, reflecting momentum in industrial activity. Manufacturing led the recovery with a growth of 4.1%, driven by robust performance in electrical equipment (33.1%), basic metals (3.5%), and coke and refined petroleum products (5.6%). In contrast, mining and electricity registered muted growth of 0.9% and 2.0%, reflecting persistent supply-side constraints. Use-based classification reveals critical divergences. Infrastructure and construction goods grew 4.0%, bolstered by public investment, while consumer durables surged 5.9%, indicating strong festive demand. However, capital goods growth slowed to 3.1%, signaling tepid private investment, and primary goods lagged at 2.6%, reflecting supply chain bottlenecks. Intermediate goods and consumer non-durables posted modest growth at 3.7% and 2.7%, respectively, underscoring uneven consumption recovery.

The data underscores a fragile industrial landscape, where isolated gains in manufacturing mask broader weaknesses. While the breadth of growth across 18 of 23 manufacturing sub-sectors is encouraging, the subdued performance in core sectors like mining and electricity points to inefficiencies. The sluggish momentum in capital goods raises concerns over investment appetite, critical for sustaining long-term industrial growth. With external headwinds and domestic bottlenecks persisting, the road ahead demands targeted policy interventions to unlock industrial potential and sustain the recovery trajectory.”

CPI:

Inflation Eases: RBI's Rate Cut Hopes Rise

“India’s CPI inflation eased to 5.48% in November 2024, down from 6.21% in October, providing a glimmer of optimism for policy continuity under the new Reserve Bank of India (RBI) Governor. This marks a welcome shift after three consecutive months of inflation exceeding the Reserve Bank of India’s (RBI) upper tolerance limit. Food inflation remained elevated at 9.04%, led by garlic (85.1%), potatoes (66.7%), and cauliflower (47.7%). However, softening in vegetables and disinflation in LPG (-10.2%) and spices (-7.4%) helped ease the headline number. Rural inflation at 5.95% outpaced urban inflation at 4.83%, underscoring a persistent divergence driven by food price pressures in rural areas.Core inflation remained subdued. The decline in energy costs, with the fuel and light category seeing deflation at -1.83%, offers further support to easing headline inflation. This moderation strengthens the case for monetary easing.We continue to expect the RBI to cut the repo rate in its February 2025 meeting, aligning with the new Governor's commitment to policy continuity and a calibrated approach to fostering growth. The inflation trajectory suggests that the peak has passed, and sustained supply-side measures, alongside easing global commodity prices, should allow the RBI room to support the economy with a rate cut.  However, this expectation hinges on sustained declines in food prices, stable global commodity markets, and minimal disruptions from geopolitical or weather-related shocks. For now, the easing inflationary trajectory signals a cautiously optimistic outlook for monetary policy and economic stability.”

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