India Sept inflation at nine-month high; Aug industrial output shrinks

MUMBAI (ICIS)–India’s retail inflation hit a nine-month high of 5.49% in September, mainly on firmer food prices, while the country’s industrial output in August shrank for the first time in 22 months.

The year-on-year increase in the consumer price index (CPI) in September was higher than the 3.65% rate seen in August, the Ministry of Statistics and Programme Implementation (MoSPI) said on Monday.

“It is likely that the increase in inflation rate for the month of September 2024 is due to high-base effect and weather conditions,” the MoSPI said.

The September inflation figure remains within the Reserve Bank of India’s (RBI) tolerance band of 2.00-6.00%.

Inflation had softened significantly in July and August with both months recording an inflation rate below the central bank’s target of 4%.

Food inflation, which forms a significant portion of the CPI, stood at 9.20% in September, a sharp increase from 5.66% in August.

On 9 October, the central bank kept its key interest rate unchanged at 6.5% but changed its monetary policy stance to “neutral”, following a deceleration in GDP growth below 7% in fiscal Q1.

RBI maintained its inflation forecast for the fiscal year ending March 2025 at 4.5%, while retaining its full-year GDP growth forecast at 7.2%.

India – a giant emerging market in Asia – overperformed most economies last year, posting a robust 8.2% GDP growth in the year ending March 2024.

Meanwhile, India’s factory output in August, as measured through the Index of Industrial Production (IIP), declined for the first time in 22 months – down by 0.1% year on year compared with a 4.7% expansion in July.

The decline was caused by an unfavourable base effect and excessive rainfall in several regions across the country, data released on 11 October showed.

August manufacturing output grew 1% year on year, while mining output contracted by 4.3% and power generation declined by 3.7%.

In the same period last year, manufacturing posted a 10% growth, with mining and power generation posted increases of 12.3% and 15.3%, respectively.

For the first five months of the current fiscal year (April-August 2024), India’s IIP grew by an average of 4.2%, weaker than the 6.2% expansion recorded in the previous corresponding period.

Focus article Priya Jestin