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Published: January 13, 2024
Updated: January 13, 2024

December 2023: India's Retail Inflation up to 5.69% and Industrial Production declines

In a recent update, India's economic landscape reveals noteworthy trends in retail inflation and industrial production for December. The data, released by the National Statistical Office (NSO), sheds light on rising food costs impacting inflation and a decline in the Index for Industrial Production (IIP) growth.

Retail Inflation Snapshot:

India's retail inflation edged up to 5.69% in December, primarily fueled by heightened food prices. Despite the increase, it remains within the Reserve Bank of India's target range for the fourth consecutive month. The annual change in the Consumer Price Index (CPI) rose from 5.55% in November, with December 2022 recording 5.72%.

Food Prices Surge:

A significant contributor to the uptick in inflation is the surge in food prices, constituting approximately half of the inflation basket. Vegetable prices and household staples played a pivotal role in sustaining elevated food costs, reflecting a 9.53% inflation rate in the food basket for December 2023.

Industrial Production Decline:

Contrastingly, India's Index for Industrial Production (IIP) witnessed a decline, dropping to 2.4% in November from the robust 11.7% recorded in October. The manufacturing sector's output grew by 1.2% in November 2023, while mining production saw a 6.8% rise. Power output also showed a positive trend with a 5.8% increase.

Government's Inflation Mandate:

The government has entrusted the Reserve Bank of India with the responsibility of maintaining retail inflation at 4%, allowing a margin of 2% on either side. This commitment aims to ensure stability in the country's economic landscape.

Longer-Term Perspective:

Notably, in August 2023, inflation reached a high of 6.83%. However, the recent figures indicate a somewhat stabilising trend. The IIP's growth of 6.4% in April-November 2023, compared to the 5.6% expansion a year ago, provides a broader perspective on industrial production dynamics.

The juxtaposition of rising retail inflation and a slowdown in industrial production highlights the intricate dynamics of India's economic scenario. As the nation navigates these trends, policymakers and market participants will closely monitor developments, aiming for a balanced economic trajectory in the coming months.