Home Retail Retail inflation breaches tolerance level but factory output up

Retail inflation breaches tolerance level but factory output up


India’s annual shot up beyond the official tolerance level of 6 per cent for July mainly on higher prices for food articles like pulses and vegetables, while on the brighter side the factory output rose 2.1 per cent in June, official data showed on Friday.

Retail inflation breaches tolerance level but factory output up
The annual retail inflation for rural India was 6.66 per cent, while that for the urban centers was 5.39 per cent

The retail inflation, based on the Consumer Price Index (CPI) of the Central Statistics Office (CSO), rose to its highest level in 23-months from 5.77 per cent in June and 3.69 per cent in the like period of last year.

The annual retail inflation for rural India was 6.66 per cent, while that for the urban centers was 5.39 per cent.

Importantly, the annual food inflation has been galloping. It was 8.35 per cent for the whole of India, 8.25 per cent in rural areas and 8.80 per cent in the urban conclaves. Among the food items, the annual rise was 27.53 per cent for pulses and 14.06 per cent for vegetables.

The official data further showed that prices of sugar and confectionery edged-up by 21.91 per cent on a year-on-year (YoY) basis, whereas cost of spices were up by 9.04 per cent.

In addition, the protein-based food items like meat and fish became expensive by 6.57 per cent. Eggs’ cost rose by 9.34 per cent.

Among the states, the retail inflation was lowest in Assam, at 3.50 per cent, followed by Himachal pradesh at 4.26 per cent. On the flip side, it was as high as 8.63 per cent in Odisha and 8.18 per cent in Gujarat.

In the case of factory output, as revealed by the Index of Industrial Production (IIP), the 2.1 per cent growth in June, highest in the last three months came against the backdrop of a 1.1 per cent growth in May this year, and 4.2 per cent rise in the corresponding month of the previous year.

Among the three major sub-indices of the IIP, that for electricity expanded the fastest by 8.3 per cent, followed by 4.7 per cent for mining, while the manufacturing index, that has the maximum weight of over 75 per cent, grew at a relatively lower pace of 0.9 per cent.

The official data on the price situation comes precisely a week after the government fixed an annual inflation target of 4 per cent, plus or minus two percentage points, for the next five years — which will be the mandate for the Reserve Bank of India to follow.

The IIP data disclosed that among the six use-based classifications of the index, the output of consumer durables segment expanded by 5.6 per cent in June, whereas the consumer non-durables segment reported a marginal growth of one per cent.

The total consumer goods segment inched up by 2.8 per cent.

However, the capital goods segment, which is a key indicator of economic activity, plunged by 16.5 per cent.

The basic goods’ output rose by 5.9 per cent and the intermediate goods’ output surged by 6.1 per cent.

Overall, 18 out of the 22 industry groups in the manufacturing sector have shown positive growth during the month under review.

Segment-wise, growth was witnessed in ‘lubricating oil’ (62.2 per cent), ‘woollen carpets’ (38.9 per cent), ‘scooters and mopeds’ (31.5 per cent), ‘ethylene’ (30.1 per cent), ‘steel structures’ (27.7 per cent) and ‘telephone instruments including mobile phone and accessories’ (25.3 per cent).

Moreover, high negative growth was reported in the ‘cable, rubber insulated'(minus 84 per cent), ‘sugar machinery’ (minus 73.2 per cent), ‘heat exchangers’ (minus 53.3 per cent), ‘particle boards’ (minus 35.5 per cent) and ‘H. R. sheets’ (minus 26.2 per cent).

Commenting on the IIP data industry body Ficci’s Secretary General A. Didar Singh said:”Revival of investment demand remains an area of concern as reflected in the steep decline of capital goods sector in the first quarter.”

“Initiatives taken by the government to address the structural issues that impact manufacturing sector growth need to continue and stepped up to ensure that growth in manufacturing accelerate.”

Another industry body said that favourable operating environment has encouraged businesses to purchase additional inputs at low cost.

According to Assocham’s Secretary General D.S. Rawat, the rate of growth in consumer non-durables picked up, pointing at revival in rural demand.

“On a similar scale, the rate of growth of consumer durables has been stable and buoyed, which suggests that urban demand is holding up and nevertheless the prolonged downfall in the output of capital goods sector is indicative of weak investment demand,” Rawat said.

“Domestic conditions for growth are improving mainly driven by consumption demand, which is expected to strengthen with an above-normal monsoon and the implementation of the Seventh Pay Commission award.”