Retail inflation at 10-month high; food prices surge in August

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Updated: September 12, 2019 6:13:39 PM

Industrial production has grown at 4.3 per cent in July 2019, improving substantially from 2 per cent in the previous month.

cpi, iip, inflation, retail inflation, food prices, cfpi, industrial productionDespite the increase, the inflation rate is still below the RBI’s target of 4 per cent.

The retail inflation rate of items such as household goods, fuel, food, etc, have touched a 10-month high in August. CPI inflation rate stood at 3.21 per cent in the month, which was 3.15 per cent in July 2019. However, despite the increase, the inflation rate is still below the RBI’s target of 4 per cent. The market consensus on the inflation rate was earlier projected at 3.35 per cent. The CPI inflation data released by the government today shows that the rise in prices was mainly driven by the price rise in food items. Food inflation (CFPI) surged to 2.99 per cent in August from 2.36 per cent in July.  

“With the CPI inflation recording only a mild increase in August 2019 despite the sharp uptick in the food inflation, we continue to expect the MPC to reduce the repo rate by 15-25 bps in the October 2019 policy review, given the continuing concerns related to economic growth,” said Aditi Nayar, Principal Economist, ICRA.

Meanwhile, the industrial production has grown at 4.3 per cent in July 2019, improving substantially from 2 per cent in the previous month. However, the production of capital goods and consumer durables significantly contracted on-year in July. In terms of industries, thirteen out of the twenty-three industry groups in the manufacturing sector have shown positive growth during the month of July, according to the Ministry of Statistics and Programme Implementation (MOSPI).

Also Read: Onion price rise: Centre asks Delhi govt to sell onion via ration shops, civil supplies department at Rs 23.90/kg

Earlier in June, IIP growth fell to a meagre 2 per cent, from 4.6 per cent in May. 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.  India’s GDP growth hit a 6-year low in the fiscal first quarter, mainly pulled down by weak demand in construction, manufacturing, infrastructure and construction.

While a certain level of food inflation may help the farmers to increase their income, the improvement in industrial production has given some hope amid the slowdown. The government is consistently meeting industry representatives to steer the Indian industry out of the slowdown. The repo rate has also been cut four times so far this year and the government still keeps alive the possibility of further cut.

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