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  1. Retail inflation up at 5.01 pct in May

Retail inflation up at 5.01 pct in May

Retail inflation edged up to 5.01 per cent in May on costlier pulses even as prices of fruits and vegetables eased during the month.

By: | Mumbai | Updated: June 12, 2015 7:52 PM
cpi inflation

The inflation for fruit and vegetables was 3.84 per cent and 4.64 per cent, respectively, in May 2015. (Reuters)

Retail inflation edged up to 5.01 per cent in May on costlier pulses even as prices of fruits and vegetables eased during the month.

The Consumer Price Index-based inflation was at 4.87 per cent in April 2015. The retail inflation was 8.33 per cent in May 2014.

Prices of pulses rose by 16.62 per cent in May 2015 over the same month last year, according to the data released by the Ministry of Statistics & Programme Implementation today.

Domestic pulses production fell by nearly two million tonnes in 2014-15 crop year due to unfavourable weather conditions such as untimely rains.

The Reserve Bank, which tracks retail inflation as a benchmark for its monetary policy, said earlier this month that price rise was still a worry for the central bank. RBI expects inflation to rise to 6 per cent by January 2016.

The overall food inflation fell to 4.8 per cent during the month, from 5.11 per cent in April 2015. The food inflation was at 8.89 per cent in May 2014.

The inflation for fruit and vegetables was 3.84 per cent and 4.64 per cent, respectively, in May 2015.

Among others, milk and its products were costlier by 7.43 per cent in May 2015 over the same month last year.

Prices of protein-rich items such as ‘meat and fish’ rose by 5.43 per cent, while spices turned costlier by 8.82 per cent in the month.

Prices of prepared snacks and meals rose by 7.89 per cent, clothing and footwear category by 6.12 per cent, housing by 4.64 per cent and fuel and light by 5.96 per cent.

Of the other categories, oils and fats prices rose by 1.95 per cent, cereals and products by 1.98 per cent, while that of egg declined by 0.78 per cent in May 2015.

Commenting on the May inflation data, ratings agency ICRA said, “The marginal uptick in CPI inflation for May 2015 is in line with our expectations, given the considerable upward revision in fuel prices during that month.

“Following the rate cut in the June 2015 RBI policy review, we expect an extended pause until the extent of the monsoon shortfall and its impact on food inflation become clear.”

Below are analyst comments on the data:

A. Prasanna, Economist, ICIC Securities Primary Dealership Ltd, Mumbai
“Both the IIP (industrial output) and CPI data augur well for the economy.
“The higher-than-expected IIP data corroborates with the solid indirect tax growth figures released by the Finance Ministry.
“The CPI data is better than what we expected. The last two readings have shown that food prices are not flaring up despite adverse weather conditions. This bodes well given the outlook for uneven monsoon distribution.
“Should CPI and food inflation continue to behave on similar lines January 2016 inflation may undershoot RBI’s 6 percent estimate.
“While we still do not expect RBI to cut rates anytime soon, this data has increased the odds for a rate move later in the calendar year.”

R. Sivakumar, Head of Fixed Income, Axis Asset Management, Mumbai
“Inflation continues to indicate that softening is continuing in line with market expectations. IIP is higher than expectations, and this is consistent with the signs of recovery.
“We continue to expect more rate cuts over a period of time. But there would be a pause of two months though due to global risk and Federal Reserve.”

Debopam Chaudhuri, Chief Economist, Zyfin Research, Mumbai
“The IIP data although volatile, has been reflecting a recovery in Indian industrial activity. Since April 2014, IIP growth was negative only once, compared to 6 times in FY 2013-14. This signals towards a healing process within the Indian economy.
“However, inflation has been sticky, making it difficult to pre-empt the monetary policy’s stance on rates.”

R. Sivakumar, Head of Fixed Income, Axis Asset Management, Mumbai
“Certainly the growth numbers is substantially better than market expectations.
“Also what we see is over the last three months the seasonally adjusted growth in industrial production indicates a significant pick-up in economic activity. That is consistent with other indicators which show that there is a some pick-up in growth.
“Despite the concerns about monsoon, we think that as long as increases in the minimum support prices are kept to a minimum we don’t see any significant food inflation.”

Jyotinder Kaur, Principal Economist, HDFC Bank
“The headline (inflation) numbers allays concern around the build up of price pressures, particularly in food inflation.
“The pick up in core inflation, as we calculate it, is largely attributable to the pick-up in transport and communication, which was expected.
“The near-term concerns on price pressures remain as the monsoon unfolds. However, we continue to believe even if there is any upside pressure on inflation it is likely to dissipate over the course of the year due to weak demand.
“We don’t rule out further policy easing by the central bank especially in August once the clearer picture of monsoon is apparent.”

Sujan Hajra, Chief Economist, Anand Rathi, Mumbai
“In both cases the numbers have come better than expected, especially IIP (industrial output). We are seeing manufacturing growth picking up for the past four months and past numbers are getting revised upwards.
“A broader trend of a slow recovery is coming out. On inflation side likely insufficient monsoon remains an issue. We don’t expect any rate cuts for the current year at least.”

Rupa Rege Nitsure,Group Chief Economist, L&T Financial, Mumbai
“The IIP numbers are completely out of sync with the story conveyed by most of the leading indicators. Its sustainability no one can predict.
“On-the-ground channels suggest recovery is not as robust as suggested by this data.
“For monsoon it’s too early to attach too much weight. What really matters is the temporal and geographic distribution of rainfall. But RBI will remain cautious.”

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