India's retail inflation in Sept eases to 3-month low; Aug IIP hits 10.3%

• Inflation has come back to the RBI's comfort level of below 6% after a gap of two months.
• Food inflation came down to 6.56% in September from 9.94%.
• August IIP has hit double digits and grown by 6.1% in the April-August period.

India's retail inflation declined to a three-month low of 5.02 in September, mainly due to easing food prices, according to the government data released on Thursday. The inflation has come back to the Reserve Bank's comfort level of below 6% after a gap of two months.

The inflation based on the consumer price index (CPI) was 6.83% in August and 7.41% in September 2022.

The previous low was in June this year when the reading stood at 4.87%.

According to the data released by the National Statistical Office (NSO), the inflation in the food basket came down to 6.56% in September from 9.94% in the preceding month.

Commenting on the reading, Madan Sabnvis, chief economist at Bank of Baroda said, "Core inflation has come down further to 4.5%, and there is moderation cross all categories with inflation being less than 5%."

He, however, pointed out that rural inflation was higher than urban at 5.3% while the latter was 4.7%. The higher weight to food products caused this spike in inflation.

The Reserve Bank mainly factors in retail inflation while arriving at its bi-monthly monetary policy.

August IIP

India's factory output, as measured by the Index of Industrial Production (IIP), has meanwhile come in at 10.3% for the the month of August 2023. A year ago for the same period, the reading was at 0.7%. Thus, the August reading is overstated due to the base effect and hence should be viewed against this backdrop.

The data released by the National Statistical Office (NSO) showed that the manufacturing sector's output increased by 9.3% in August 2023.

"This high growth in IIP corroborates with the buoyant PMIs and GST collections. The next two months should ideally see sustained growth if rural demand revives – this has been a lacuna so far," said Sabnvis.

Mining production rose 12.3% during the month under review. Power output grew 15.3%. The IIP grew by 6.1% in April-August 2023 compared to 7.7% in the same period of 2022-23.