India CPI at 5.10%, Benign Core at 3.59% and the usual Culprits - Vegetables, Spices and Pulses and Industrial Production at 3.80% yoy

India's headline CPI decelerated to 5.10% yoy from prior 5.69% and the Core CPI further decelerated to 3.59% yoy from prior month's figure of 3.89%. MoM Decline in headline prices was to the tune of 0.11%. The Headline number comes in line with Reuters Poll Estimates. The data does not do much to alter the inflation trajectory and the resultant rates trajectory. 

General Index	Wt	YoY Growth in %
1) Food and beverages	45.86	7.58
2) Pan, tobacco and intoxicants	2.38	3.28
3) Clothing and footwear	6.53	3.37
4) Housing	10.07	3.20
5) Fuel and light	6.84	-0.60
6) Miscellaneous	28.31	3.82

Oil and Fats which contributes 3.56% to the total CPI and the subcomponent was down 15% yoy but Vegetables / Pulses (wt 2.38%) and Spices (wt 2.5%) continue to be categories weighing on the CPI. Vegetables (wt 6%) rose 27% yoy (down 4.2% mom), Pulses and Products rose 20% yoy (down 0.90% mom) and Spices rose 16% (down 1.3% mom). 

The last monetary policy statement highlighted the uncertainty around the food price pressures and recurring food price shocks could interrupt the ongoing disinflationary process. While the seasonal factors have contributed to easing of vegetable inflation -4.2% mom but a lot of further progress is desirable.  

Qtr	RBI Projections	Glide Path (own est)	Real Rates Repo Rates - Inflation)
Q4	5.00%	4.98%	1.82%
FY 25 Q1	5.00%	5.21%	1.57%
FY25 Q2	4.00%	4.32%	2.45%

The space to Rate cuts is available but the RBI, like the Federal Reserve would maintain policy at restrictive levels since the growth outlook is robust at 7%. Once the Elections are out of the way and the Global Rate cycle starts reversing, RBI is more likely to begin the process of cutting rates. The base case is for rate cuts to start by the middle of this year. 

Industrial Production for the month of Dec rose 3.80% yoy with Manufacturing and Mining growing over 5% while Electricity exhibited a 1% growth.