Economy

June CPI eases to 6.26% despite pricier food, fuel

Our Bureau. New Delhi | Updated on July 12, 2021

economy

May IIP rises to 29.3 per cent on base effect

Retail inflation remained over 6 per cent for the second successive month though it eased a tad in June to 6.26 per cent. It was 6.30 per cent in May. Experts feel that retail inflation has peaked.

The retail inflation rate in June has eased despite the rise in food and fuel inflation. Food inflation rose to 5.15 per cent in June from 5.01 per cent in May while fuel inflation marched to 12.68 per cent from 11.58 per cent, respectively.

According to Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd, although the headline inflation was lower than the consensus, core inflation inched up to 6.3 per cent last month as against 6.2 per cent in May. “This was higher than our forecast of 5.7 per cent because notwithstanding the sharp month-on-month increase in May, all components of the 'miscellaneous' basket rose again on a M-o-M basis in June. This makes us believe that as reporting improves, the headline CPI inflation is likely to fall below 6 per cent in July and towards 5 per cent by October,” he said.

Further, he said the headline inflation appears to have peaked, which will provide some confidence/relief to the markets that the RBI will stay on course longer than feared after May. “We don't see any rate hike in FY22.”

Aditi Nayar, Chief Economist with ICRA, said that following today's CPI inflation print, inflation forecasts are expected to be revised upwards in the next MPC review, amid a status quo in the rate and stance, albeit with an underlying tone of uneasiness in the commentary. “The tussle between supporting the nascent, incomplete revival in growth and preserving the anchoring of inflationary expectations will continue,” she said.

IIP growth

Industrial growth rate, based on the Index of Industrial Production (IIP), for May grew 29.3 per cent and for April-May shows a year-on-year jump of 68.8 per cent.

Sunil Kumar Sinha, Principal Economist with India Ratings, said this is mainly a base effect, considering the nationwide lockdown in April-May 2020. A comparison with the pre-Covid period would be more appropriate.

Compared to May 2019, the output of all the use-based IIP segments were lower in May 2021. “The output of primary, capital, intermediate, infrastructure, durable and non-durable goods in May 2021 was 93 per cent, 63.1 per cent, 93.6 per cent, 89.5 per cent, 58.8 per cent and 91.1 per cent of the May 2019 levels,” Sinha said.

 

Core sector output rises 16.8% in May

 

Published on July 12, 2021

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