India's retail inflation, as measured by the Consumer Price Index (CPI), declined to a three-month low of 5.02% in September due to easing food prices, according to data released by the National Statistics Office (NSO) on Thursday (October 12).
The inflation has come back to the Reserve Bank of India's comfort level of below 6% after a gap of two months. In July 2023, India's CPI stood at 7.44%, while in August 2023, it was at 6.83%.
Industrial output as measured by the Index of Industrial Production (IIP) was 10.3% in August 2023. Factory output measured in terms of the IIP had contracted by 0.7% in August 2022.
The data showed that the manufacturing sector's output increased by 9.3% in August 2023. Mining production rose 12.3% during the month under review. Power output grew 15.3% in August 2023. The IIP grew by 6.1% in April-August 2023 compared to 7.7 percent in the same period of 2022-23.
According to the CNBC-TV18 Poll of economists, the forecast CPI was estimated at 5.5%, and the August IIP was pegged at 9.5%.
Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers, said, "The significant decline in retail inflation in September 2023 was unexpected, as was the significant increase in July. Positive and negative surprises in the last three months have been primarily influenced by food prices."
"The core inflation, however, remained essentially benign during this roller coaster ride of retail inflation in India. The reduction in inflation would reassure the Reserve Bank of India and validate the central bank's decision to maintain its recent stance of unchanged policy rate. Nonetheless, even at this level, retail inflation remains significantly higher than the RBI's stated monetary policy target of 4%," Hajra added.
Rohit Arora, CEO and Co-Founder, Biz2Credit and Biz2X, said, "The recent dip in the retail inflation rate to 5% in September, down from 7.4% a year ago, marks a welcome relief for consumers and the broader economy. This gradual easing of inflation, reflected in the Consumer Price Index (CPI), underscores the resilience of our financial ecosystem."
"A lower inflation rate boosts purchasing power, giving consumers more confidence in their spending decisions. For the fintech sector, it means a more predictable environment for interest rates and lending conditions, setting the stage for continued growth and innovation.
With the Israel-Hamas conflict raising oil price concerns, especially if the strife extends across the broader Middle East, we remain cautiously optimistic about the future and will continue to adapt to the evolving financial landscape for the benefit of our customers," Arora added.
