Inflation will decline materially and come down to 5 per cent by March 2023. For the first quarter (Q1) of fiscal 2024 (FY24), SBI expects average CPI of 4.7 per cent. Against the evolving landscape, a little incentive for further rate hike is expected, with synchronised past actions on rate front yet to show the full impact.

The core CPI also moderated to 6.09 per cent in December 2022, compared to 7.09 per cent in April 2022. However, in the past 20-months core CPI has remained above 5.7 per cent and average was at 6.07 per cent, which indicates that core CPI remained stagnant and elevated. Index of Industrial Production (IIP), for November 2022, has grown on a year-on-year (YoY) basis at 7.1 per cent to 137.1. IIP for manufacturing sector grew at 6.05 per cent YoY to stand at 136.7. IIP decline has been seen in textiles, wearing apparel, and leather.

The gap between the country’s rural and urban CPI increased to 66 basis points (bps) in December 2022 as compared to only 1 bps in May 2022. The country’s rural CPI increased by 6.1 per cent in December 22 as compared to 5.4 per cent increase in urban CPI. Large and persistent divergence between rural and urban inflation could result in differences in real wage rates, real interest rates, and inflation expectations, which can pose challenges for monetary policy, as per the Ecowrap report.

Fibre2Fashion News Desk (DP)