CPI Data Released: Consumer Price Index At 3.65% In August 2024| Food Inflation Rises| July IIP Data

hello and welcome you're watching in your interest I am scha kotari India's retail inflation has surged to 3.6% on an annual basis on August in August of 2024 as against 5year low of 3.54% according to data released just a couple of minutes back the food inflation which accounts for around half of the overall CPI basket accelerated to 5.66% in August from a 13mon low of 5. 42% in the previous month the data has now revealed the headline inflation number all beat within the Reserve Bank of India's tolerance range of 2 to 6% has come in slightly higher in the month of August what does it really mean for the economy and whether this will dim the chances of a possible rate cut in future let's talk about that joining us on the show is miali nikor founder and chief Economist at nikor Associates miali good to have you back on the show thank you very much for taking time out your first quick reaction on the inflation at 3.65% slightly above than all the other estimates out there thanks thanks sha for having me as always uh for sharing uh my analysis on this so I think one of the charts that you were just showing you know before we cut into the screen was around the data over the last year on month on month inflation and if you notice the numbers for August 20123 actually stood at 6.83 whereas the number for August 202 4 is sitting at 3.65 now if you look there's a clear declining Trend in the annual inflation rates on a month-on-month basis over the last year I would say that this is very good news for the Indian economy because it means that all the efforts that the RBI has been taking in terms of keeping interest rates constant for the you know last five or six meetings and discussions and deliberations that the RBI monetary policy committee has been having are now bearing fruit and we're seeing that inflation is stabilizing the other factor which is kind of driving this more stable inflation rate is the lower fuel prices that you were also talking about earlier that you know if you see global fuel prices stabilizing a little bit we see that cut is now going to start passing on to consumers in the prices of goods uh that are being transported from place to place so Logistics cost comes down down also investment in the logistics sector I think starting to bear fruit now where we see that the overall inflation rates are falling so I would not actually read this okay I want to I want to stick to right now inflation numbers I I will go to petrol and diesel prices in just a bit but uh sticking on to food inflation the number here coming in at 5.66% for the month of August uh is slightly higher in fact a lot higher uh if you look at it in percentage terms from 5 . 42% in the previous month to 5.66% in the month of August what are you making of food inflation still uh continues to be a pain Point uh not just for the headline inflation number but also for people at large uh sha actually I would say that in this quarter we are doing much better on food inflation than the previous quarter because you can see that in the previous quarter we hit a high of almost 9% in June whereas in the last one or two months we've managed to get that under control as well and bring it down to below 6% which I think is an important Target you know having below 6% food inflation rate given the uncertainties that are associated with the different climatic events even in this quarter we have seen some droughts some floods coming in and despite that you know the food inflation being managed because of the rice and wheat distribution schemes that actually make it easier for a large proportion of the population to at least access basic food grains so I think there is a good management of the food inflation but we definitely need to invest in uh you know better mechanisms of food distribution another number that has come out uh uh just you know couple of minutes back is the India industrial output growth uh for the month of July at about 4.8% uh is that well within the expectation I think sha that's a little bit lower than what I was personally expecting I was expecting that to be uh you know a little bit higher in the range of 5 you know 5.5% because we've been seeing very good numbers when it comes to manufacturing growth if you remember you know even for the GDP data that came out recently we saw manufacturing growth coming in at 7% before that at 10% so I was actually expecting the iip to be a little bit higher in this uh you know in this cycle but I think it's a little bit lower than my expectation I was expecting the range of 5% okay what played the spoil sport uh from what I'm reading uh it slowed to 4.8% in July mainly due to poor show by mining manufacturing sectors could that be because in the month of July we were just coming out of uh the election Euphoria so perhaps it will start picking up now in the month of August actually in facta you're very right this links with the entire macroeconomic scenario in the country in the April to June quarter because a lot of decision making you know is paused during election Cycles a lot of decision making around policies around approvals that gets a little bit you know stalled and I do think that we'll see new investment decisions also industrialists will try to defer their investment decision to seeing okay where is the political uh you know environment coming to be uh more stable which states which uh locations Etc all these choices and decisions are sometimes deferred till you know post elections so that is definitely one reason but I do feel that there is a overall macroeconomic slowdown that we did witness with the GDP numbers and I think somewhere we have to look at our own investment strategies uh especially in the manufacturing sector making them more export oriented making them more climate resilient these are two important measures we need to start taking in order to boost growth okay and uh another you know important obviously was the number that came out of US inflation data that number was important at 2.5% at a 43 month low year on-ear in the month of August are we looking at and this was lower than expectation so are we looking at therefore uh uh you know some sort of uh realignment on what could come by the way of a Fed rate cut come 18th of September absolutely sh I think the whole Global markets are waiting for the Fed rate cut and I do think that the RBI will also follow it up with a rate cut given the lower than expected GDP numbers it and also a good solid record on inflation management the conditions are now right for the RBI to come and announce a rate cut even in you know the Indian interest rates on the back of reductions in the US interest rates I do expect the US interest rate cuts to be uh not so deep I think they are in two phases what is your expectation given there's been there's been a conflict of data here emerging while the jobs data has been extremely disappointing inflation still continues to inch up uh we were looking at and and you know a lot of economists and obviously the Fed was looking at a possibility of a soft Landing uh do you think they have been able to mitigate uh you know the inflationary pressur so far so it's about time now for a major rate cut what is your expectation around uh us rate cut will it now be tempered uh given that inflation data is not very favorable no I think a 2.5% inflation rate is still very manageable but I still think they're going to go with their original plan of a soft Landing so maybe two you know a 0.25 to 0.5 basis points in this round and then another 05 uh or maybe even 1% in uh you know in in December but at least for now it will be tempered .25 to.5 basis points I don't think it'll be more than that all right not more maybe more than half a percentage point but what about India are we looking at a possibility of a rate cut anytime soon will the RBI follow us fed should it wait for us fed to cut rates because if you're looking at India inflation numbers it is coming well within the range uh well below 4% at least in the last few months would you say that 4% is The New Normal below the 4% rate range is The New Normal or should we wait for a couple of more months to for it to be constant at 4% before RBI starts cutting rate I think at this point in time we can't call uh below 4% new normal but at the same time we have to now consider is this the right time for the rate cut and I think conditions are right for a rate cut because at the end of the day this is the time when we've seen the GDP numbers you know slow down we can't afford for a GDP slow down in any case because at the end of the day when we look at our overall growth goals poverty reduction goals goals around income redistribution around improving the standard of living for our population all of that requires macroeconomic growth and therefore uh you know the conditions with inflation being stable are good for the RBI to announce a rate cut maybe following uh you know the signals given by the US fed but definitely they have to wait and watch for the US fed signals all right uh well that's the word coming in as far as inflation data is concerned and whether RBI will cut interest rates post us feds we'll of course have to wait for just a couple of more days to figure that out [Music]