Economy

Retail inflation inches up in June even as industrial growth slows down in May

Our Bureau New Delhi | Updated on July 12, 2019 Published on July 12, 2019

A surge in the prices of meat, fish and pulses pushed the rate of retail inflation a tad higher to nearly 3.2 per cent in June. Meanwhile, industrial production still seems to be in the slow lane, with 3 per cent growth in May.

Rate cut possibility

These two indicators will play a key role in the monetary policy review to be undertaken by the Monetary Policy Committee (MPC) in the second week of August.

Since the rate of retail inflation is still below the targeted median rate of 4 per cent, and there is need to lower the rate of investment, it is expected that the MPC will go for another rate cut, the fourth successive one this calendar year.

Experts also feel the rate cut this time round could be different from the earlier ones of 25 basis points each.

 

 

Retail inflation

The rate of retail inflation based on the Consumer Price Index (CPI) stood at 3.18 per cent in June, against 3.05 per cent in May. Urban areas faced higher inflation with the CPI rate at 4.33 per cent.

Food inflation too hardened in urban areas, at 5.5 per cent.

According to Aditi Nayar, Principal Economist with ICRA, the CPI inflation remained largely benign, in line with expectation, recording only a modest uptick despite the delay in the monsoon and kharif sowing.

While food inflation hardened to 2.4 per cent, its impact was partly offset by a mild dip in core inflation to 4.2 per cent.

While vegetable prices are likely to firm up due to seasonal factors as well as higher transport costs, the pick-up in the monsoon rainfall is likely to boost sowing in the near term, which will help to keep food inflation in check.

Although the recent uptick in crude oil prices has been offset by rupee appreciation, the increase in duties and cesses on fuels introduced in the Budget will have a modest impact on retail inflation.

Industrial production

Meanwhile, industrial production slowed down a bit in May to 3.1 per cent, against 4.32 per cent in April and 3.8 per cent in May 2018.

Per use-based classification, the year-on-year growth rates in May were 2.5 per cent in primary goods, 0.8 per cent in capital goods, 0.6 per cent in intermediate goods and 5.5 per cent in infrastructure/construction goods.

Consumer durables and consumer non-durables recorded growth of -0.1 per cent and 7.7 per cent respectively.

 

 

Published on July 12, 2019
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