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The Economy Observer
12 February 2025
Jan’25 inflation eases, IIP weakens in Dec’24
Expect ~6% real GDP growth in 3QFY25
Headline CPI inflation came down to a five-month low of 4.3% YoY in Jan'25 vs. 5.2% in Dec'24. The deceleration was
mainly led by a five-month slowest growth in food inflation (6% in Jan'25 vs. 8.4% in Dec'24). However, core inflation
remained broadly stable at ~3.7% during the month (Exhibit 1). On a sequential basis, inflation declined 1.0% in Jan'25 vs.
0.5% in Dec'24. The inflation number was slightly lower than the market consensus of 4.5% and our forecast of 4.7%. In
Apr'24-Jan'25, inflation stood at 4.9% vs. 5.4% in the same period last year.
Food inflation came down to 6% YoY in Jan’25 (lowest in five months) vs. 8.4% in Dec’24. Details suggest that lower food
inflation (vs last month) was mainly attributed to a five-month slowest growth in prices of vegetables (11.4% in Jan’25 vs.
26.6% in Dec’24), 31-month lowest increase in cereal prices, 29-month lowest increase in pulse prices, and 27-month
lowest increase in prices of eggs. On the other hand, prices of oil & fats surged to a 33-month high of 15.6% in Jan’25. CPI,
excluding veggies, stood at a 12-month high of 3.8% in Jan’25. Notably, the prices of fuel & light items continued to
contract in Jan’25 (-1.4% YoY in Jan’25 vs. -1.3% in Dec’24).
Other details suggest that: 1) Services inflation remained broadly stable at 3.6% YoY in Jan'25, while goods inflation came
down to a five-month low of 4.5% in Jan'25; 2) CPI, excluding veggies (weight 94%), stood at a 12-month high of 3.8%
YoY; 3) Imported inflation jumped to a 23-month high of 5.5% in Jan'25, while domestically generated inflation came
down to 4.1%, lowest in six months (vs. 5.2% in Dec'24); 4) Standard core inflation (excluding food & energy) remained
broadly stable at ~4% YoY in Jan'25; and 5) Details confirm that 27% of the CPI basket posted 5%+ inflation in Jan'25 (vs.
29% in Dec'24).
At the same time, industrial output grew at a three-month low pace of 3.2% YoY in Dec’24 (vs. 5%/4.4% in
Nov’24/Dec’23). The deceleration in industrial output was mainly led by a four-month slow growth rate in manufacturing
sector. The number was lower than the market consensus of 3.5% and our forecast of 4.7%. In Apr-Dec’24, IIP growth
averaged 4% YoY, compared to 6.3% in the corresponding period last year.
Manufacturing sector output grew 3.0% YoY in Dec’24 (lowest in four months) vs. 5.5% in Nov’24 and 4.6% in Dec’23. The
details of the manufacturing sector suggest that 69% of the sub-sectors grew at a slower rate compared to Dec’23 (vs.
43% in Nov’24), 66% of the items grew less than 5% (vs. 52% in Nov'24), and 25% of the items posted a contraction (vs.
only 14% in Nov’24). According to the use-based classification, the growth in the output of consumer goods stood at a 13-
month low in Dec’24 (-2.1% in Dec’24 vs. 11.9% in Dec’23), led by a contraction in consumer non-durables output (worst
in 26 months). At the same time, capital goods (at 10.3% in Nov’24 vs. 8.8%/3.7% in Nov’24/Dec’23) grew at a five-month
high pace in Dec’24, though infrastructure & construction goods and consumer durables output grew at a slower pace in
Dec’24 (vs. Nov’24).
Overall, slower inflation and weak growth support the RBI’s rate cut last week. With IIP growth improving slightly to
3.9% YoY in 3QFY25 from 2.7% YoY in 2Q, we continue to expect a sub-6% real GDP growth in 3QFY25 vs 5.4% in 2Q.
CPI inflation down to a five-month low:
Headline CPI inflation came down to a
five-month low of 4.3% YoY in Jan’25 vs. 5.2% in Dec’24. The deceleration was
mainly led by a five-month slowest growth in food inflation (6% in Jan’25 vs.
8.4% in Dec’24). However, core inflation remained broadly stable at ~3.7%
during the month
(Exhibit 1).
On a sequential basis, inflation declined 1.0% in
Jan’25 vs. 0.5% in Dec’24. The inflation number was slightly lower than the
market consensus of 4.5% and our forecast of 4.7%. In Apr’24-Jan’25, inflation
stood at 4.9% vs. 5.4% in the same period last year.
Food inflation came down to 6%:
Food inflation came down to 6% YoY in Jan’25
(lowest in five months) vs. 8.4% in Dec’24. Details suggest that lower food
inflation (vs. last month) was mainly attributed to a five-month slowest growth
in prices of vegetables (11.4% in Jan’25 vs. 26.6% in Dec’24), 31-month lowest
increase in cereal prices, 29-month lowest increase in pulse prices, and 27-
month lowest increase in prices of eggs. On the other hand, prices of oil & fats
Nikhil Gupta
– Research analyst
(Nikhil.Gupta@MotilalOswal.com)
Tanisha Ladha
– Research analyst
(Tanisha.Ladha@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.