Retail inflation hits 8-month high, industrial output growth falls; double trouble for economy continues

At 3.18 per cent, the inflation rate in India has touched a 8-month high in June 2019. CPI inflation rate in May was 3.05 per cent and it was 4.92 per cent in June 2018.

At 3.18 per cent, the inflation rate in India has touched a 8-month high in June 2019. CPI inflation rate in May was 3.05 per cent and it was 4.92 per cent in June 2018. The rise in retail inflation is primarily due to a surge in food prices. Inflation related to Consumer Food Price Index (CFPI) rose to 2.17 per cent in June 2019, which was 1.83 per cent in May 2019 and 2.91 per cent in June 2018. A Reuters poll had predicted a retail inflation rate of 3.20% for June.

On the other hand, Index of Industrial Production (IIP) growth rate fell to 3.1% in May. IIP growth rate remained at 3.4 per cent in April 2019 and 3.8% in May 2018. IIP growth rate in manufacturing fell to 2.5 per cent from 3.6 per cent in May 2018, and the growth rate of mining decreased from 5.8 per cent to 3.2 per cent m-o-m in May, according to the Ministry of Statistics and Programme Implementation (MOSPI).

At -0.1 per cent, growth rate in consumer durables grew in negative, whereas non-consumer durables grew at 7.7 per cent in May 2019. Primary goods, capital goods and intermediate goods grew at 2.5 per cent, 0.8 per cent and 0.6 per cent respectively.

“In line with our expectation, CPI inflation remained largely benign, recording only a modest uptick to 3.2% in June 2019, despite the delay in the monsoon and kharif sowing. While food inflation hardened to 2.4%, the impact of the same was partly offset by a mild dip in core inflation to 4.2% in June 2019,” according to Aditi Nayar, Principal Economist, ICRA.

She further added that the seasonal factors and higher transport costs have shot up the vegetable prices. The monsoon will boost sowing, which would bring down the vegetable prices, she also said. However, the shrinking of the monsoon deficit has raised some concerns regarding the trend of food prices, the economist added. Aditi Nayar expects CPI inflation to remain comfortably below the MPC’s target of 4% in the present quarter as well.

Source: financialexpress.com

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