India's retail inflation rises to 3-month high of 5.55%, industrial production at 16-month high of 11.7%

Factory output had contracted by 4.1% in October 2022. The data released by the National Statistical Office (NSO) showed that the manufacturing sector's output grew by 10.4% in October 2023.

Mining production rose 13.1% during the month under review. Power output rose 20.4%. The IIP grew by 6.9% in April-October 2023 compared to 5.3$ growth a year ago.

According to the CNBC-TV18 Poll of economists, the forecast Consumer Price Index (CPI) was estimated at 6%, and industrial production was pegged at 10.5%.

In the monetary policy announced last week, the RBI projected the CPI inflation at 5.4% for 2023-24, with a reading of 5.6% in the third quarter and 5.2% in the last quarter.

The CPI data is mainly factored in by the RBI while making its bi-monthly monetary policy. Industrial output, or factory output, is the closest approximation for measuring the economic activity of the country's business landscape.

Sujan Hajra, chief economist & executive director at Anand Rathi Shares and Stock Brokers, said the increase in retail inflation is primarily due to a strong increase in vegetable inflation, while core inflation continues to fall. Core inflation is currently reaching the RBI's target rate.

"Furthermore, the continuation of robust growth data, like the double-digit above-estimated industrial production number for October 2023 reported today, implies that rate cuts are not required anytime soon," Hajra said.

Vivek Rathi, National Director of Research, Knight Frank India, said, "The core inflation has notably softened to 4%, and a moderation has also been witnessed in fuel prices. Going forward, there would be an uptick in consumer headline inflation, however, will be volatile food prices. Broadly, the inflation has moderated, thus would provide the RBI to keep the repo rate unchanged for a while now."

"11.7% growth in industrial production during October 2023 was broad-based with growth in output witnessed across all the sectors. While manufacturing, mining and electricity has been able to drive the industrial output in the last few months, the capital goods output as well has picked up. This indicates a heightened economic activity and a sustained demand for goods in the economy," Rathi said.