Inflation eases below 5% for the first time in five months in March; industrial production rises to a 4-month high
inflation fell below 5% for the first time in five months in March, easing to 4.85% compared with 5.09% in the previous month. On the other hand, industrial output rose in February to a four-month high of 5.7%, data released Friday showed.
While inflation declined to a 10-month low in March, experts indicate it is unlikely to deter the Reserve Bank of India from lowering rates anytime soon, as it tracks monsoon and other external factors.
“We expect the RBI rate cut cycle to start in August at the earliest. This is contingent on the Fed rate cut cycle starting in June or July. In case the Fed rate cut cycle gets delayed due to adverse US inflation prints, the RBI rate cut cycle could also get delayed,” said Gaura Sengupta, India economist at IDFC First Bank.
At its meeting earlier this month, the Reserve Bank of India’s monetary policy committee held the policy rate at 6.5% for the seventh consecutive time.
“Monetary easing is likely to be quite backended in 2024, pending clarity on various factors such as the monsoon turnout, the evolution of crude oil prices, and rate action from the US Fed. At best, we foresee 50 bps of rate cuts from the MPC in H2 FY2025," said Aditi Nayar, chief economist, Icra.
Food inflation still high
While overall consumer inflation eased to 4.85% from 5.09% in the previous month, the decline in food inflation was marginal to 8.52% from 8.66%.
Sequentially, food prices rose 0.16% in March compared with the previous month, even as falling services inflation kept the overall index
