Inflation may bite your household budget, may have risen to 10-month high in August

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Published: September 10, 2019 12:27:33 PM

The Kotak report estimates the industrial production to have grown by 2.3 per cent in July, which is a marginal improvement from 2 per cent in the previous month.

fruits, vegetables, CPI, inflation rate, inflation in august, MOSPI, IIP, industrial production, manufacturingThe slowdown was mainly attributed to the weakness in mining and manufacturing. (Bloomberg image)

Retail prices of different items such as household goods, fuel, food, etc, are likely to have touched a 10-month high in August. CPI inflation rate stood at 3.15 per cent in July, which is projected to have spiked to 3.23 per cent in August, according to Kotak Institutional Equities Research. The report underlines that the market consensus on inflation estimate in August is even higher at 3.35 per cent. In July, the retail inflation rate moderated marginally from an 8-month high level in June. With the current projection, inflation is likely to remain below the RBI’s target of 4 per cent for the thirteenth consecutive month, despite aggressive repo rate cuts.

The Kotak report also estimates the industrial production to have grown by 2.3 per cent in July, which is a marginal improvement from 2 per cent in the previous month. Earlier in June, IIP growth fell to a meagre 2%, from 7% in the same month a year ago. The slowdown was mainly attributed to the weakness in mining and manufacturing. Manufacturing of primary goods grew at just 0.5 per cent in June, which was at 9.2 per cent a year ago.

At the same time, the manufacturing of infrastructure and construction goods contracted by 1.8 per cent. There was also a steep contraction in the manufacturing of capital goods in the month. The Kotak report highlights that the market expects the IIP to have grown at 2.6 per cent in July.

India’s GDP growth hit a 6-year low in the fiscal first quarter, mainly pulled down by weak demand in construction, agriculture, and manufacturing. “More than the global scenario, the falling demand within India is dragging the economy,” Ramesh Iyer, Deputy Vice President- Product Development at ICEX, told Financial Express Online. He added that the weakness in manufacturing is mostly hurting the commodities in India. The slowdown in the manufacturing weakens the growth of capital, primary and intermediate goods.

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