Inflation surprise

Inflation surprise

Subject: Economy

Section: Fiscal Polity

The RBI is expected to maintain interest rates until the April-June quarter, despite a drop in retail inflation to 6.46% in India, thanks to falling food prices and favourable statistical factors. However, core inflation remains at 5.9%, indicating that demand-driven price pressures are still a concern. Industrial growth, based on the Index of Industrial Production (IIP), has rebounded to 4.2% in April, with manufacturing leading the way. There are concerns around the El Nino impact on the monsoon, which could impact crop output and food inflation. Despite healthy investment numbers, there are still uneven signals of recovery in domestic consumption.