scorecard
  1. Home
  2. policy
  3. economy
  4. news
  5. India's retail inflation rises to a 3-month high; factory output reading shows improvement

India's retail inflation rises to a 3-month high; factory output reading shows improvement

India's retail inflation rises to a 3-month high; factory output reading shows improvement
  • Inflation for the food basket was at 4.49% in June, higher than 2.96% in May.
  • The manufacturing sector's output grew 5.7% in May with consumer sector being a positive surprise.
  • RBI will factor in these readings when it decides its policy action next month.

India's retail inflation rose to a three-month high of 4.81% in June, mainly on account of hardening prices of food, according to the government data. Inflation based on the Consumer Price Index (CPI) stood at 4.31% (revised upward from 4.25%) in May and 7% in June 2022.

It was not all gloom though when it came to macro economic data. India's factory output - as measured by the Index of Industrial Production - rose to 5.2% in May, up from 4.2% in April.

First, the pinch on the pocket

Inflation for the food basket was at 4.49% in June, higher than 2.96% in May. The food basket accounts for nearly half of the CPI.

The major elements driving this inflation are cereals (12.7%), eggs (7%), milk (8.6%), pulses (10.5%) and spices. Household goods, personal care items, education and health have inflation of above 5%.

"The RBI will keep a keen eye here and it is almost given that nothing will change in the policy next month. More caution will be expressed on the inflation front," said Madan Sabnavis, Chief Economist of Bank of Baroda.

The inflation reading is an important barometer for the Reserve Bank of India's Monetary Policy Committee in determining the repo or the lending rate of the country as it is mandated to ensure that retail inflation remains at 4% with a margin of 2% on either side. The next policy review is scheduled early next month.

Last month, the Reserve Bank kept policy rates unchanged at 6.5% and projected retail inflation for the current fiscal to average at 5.1%, with June quarter inflation pegged at 4.6%.

Industrial production grows 5.2% in May

Meanwhile, India's industrial production rose to 5.2% in May from 4.5% in April 2023, mainly due to good performance by the manufacturing and mining sectors, according to the official data released on Wednesday. The factory output growth measured in terms of IIP stood at 19.7% in May 2022, mainly due to a lower base effect.

"The growth rates over corresponding period of previous year are to be interpreted, considering the unusual circumstances on account of COVID 19 pandemic since March 2020," an official statement explained.

As per the IIP data released by the National Statistical Office (NSO), the manufacturing sector's output grew 5.7% in May 2023 against a 20.7% expansion a year ago.

As per use-based classification, the capital goods segment grew 8.2% in May this year compared to 53.3% a year ago.

"IIP growth at 5.2% was a pleasant surprise for May given that we had forecast 4.5%. The consumer durable segment continues to stagnate at 1.1%. FMCG production has picked up in May with 7.6% growth that can be attributed to some revival in rural demand post rabi harvest. Capital goods have done well which is positive," analysed Sabnavis.

Power generation rose 0.9% in May 2023 compared to a growth of 23.5% a year ago.

Mining output rose by 6.4% during the month under review against an 11.2% expansion in the year-ago period.

(With text inputs from PTI)

READ MORE ARTICLES ON



Popular Right Now



Advertisement