Inflation hits 5-mth high of 3.36% in Aug, IIP slips in July

| | New Delhi

With the skyrocketing price rise of vegetables and fruits, country’s retail inflation went up to a five-month high of 3.36 per cent in August, while industrial output during July slipped to 1.2 per cent due poor manufacturing figures, according to data released by the Central Statistics Office (CSO) on Tuesday.

The muted industrial output numbers in July and rise in the August retail inflation have prompted the Reserve Bank of India (RBI) for further rate cuts in its next monetary policy review. Last month, the RBI had cut its key lending rate by 25 basis points to 6 per cent in view of softening inflation. The next monetary policy review is due on October 4.

“Not at all, in fact, the fact that the prices have gone down to 2.36 per cent from last year was itself a situation that happens often all. The RBI has 4-6 per cent inflation range, we are still below that range also,” Union Minister Piyush Goyal said.

Factory output, measured in terms of IIP, had declined by 0.2 per cent in June. During April-July, IIP grew by 1.7 per cent, down from 6.5 per cent in the same period last year.

Growth of the manufacturing sector, which makes up 77.6 per cent of the index, decelerated sharply to 0.1 per cent in July compared to 5.3 per cent in the same period of 2016. However, India Inc feels that the slowdown in manufacturing sector reflects depressing investment outlook.

“As the slowdown is more pervasive this time in terms of number of sectors, it calls for urgent need to revive investments through reforms especially at the state level and also by bringing down interest rates,” FICCI Secretary General Sanjaya Baru said in a statement.

“As the consumption demand would increase in the festive season and investment too due to the Government measures taken in the last few months, we can expect growth to pick up in coming months,” he added.

For the output of capital goods, it contracted 1 per cent in July as against a growth of 8.8 per cent in the year-ago period. Consumer durable goods met with similar fate, with production declining 1.3 per cent as against a nominal growth of 0.2 per cent a year earlier.

However, electricity generation stood out as it posted a growth of 6.5 per cent in July, up from 2.1 per cent in July 2016. Mining output, too, expanded by 4.8 per cent, as against 0.9 per cent in the year-ago month. 

In terms of use-based classification, growth rates in July 2017 over the same month last year stood at 2.3 per cent for primary goods, (-)1.8 per cent for intermediate goods and 3.7 per cent for infrastructure and construction goods.

 Consumer non-durables have recorded a growth of 3.4 per cent. A total of eight out of 23 industry groups in the manufacturing sector grew in July 2017 compared to the corresponding month last year. According to consumer price index (CPI) data, retail inflation stood at 2.36 per cent in July.

The August inflation number is the highest since March 2017, when it was recorded at 3.89 per cent. Overall food inflation in August also moved up, reversing the deflationary trend, to 1.52 per cent, the government data showed.

Daily consumables like fruits and vegetables turned costlier during the month, with inflation print coming in at 5.29 per cent and 6.16 per cent, respectively, as against 2.83 per cent and (-)3.57 per cent in July, the data showed.

Likewise, prepared meals, snacks and sweets as a category turned pricier, with the rate of price rise at 1.96 per cent, up from 0.43 per cent in July. Also, transport and communication means became costlier during the month, with inflation rising to 3.71 per cent from 1.76 per cent in July.

However, items such as cereals and products, meat and fish, oils and fats became cheaper at inflation readings of 3.87 per cent, 2.94 per cent and 1.03 per cent, respectively.  



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