August retail inflation at 10-month high of 3.21% on back of high food prices

On the other hand, India's factory output growth grew by 4.3% in July from a rise of 1.17% reported for June, showing some signs of recovery.
August retail inflation at 10-month high of 3.21% on back of high food prices
August retail inflation at 10-month high of 3.21% on back of high food prices
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Higher food prices pushed up India's August retail inflation to 3.21 per cent from 3.15 per cent in July, official data showed on Thursday. In October 2018, retail inflation had touched a high of 3.38%.

However, the Consumer Price Index (CPI) in August was lower than the corresponding month of the last year when retail inflation stood at 3.69 per cent.

According to the data furnished by the National Statistical Office (NSO), the Consumer Food Price Index (CFPI) widened to 2.99 per cent in August from an expansion of 2.36 per cent in July and 0.29 per cent in August 2018.

Product-wise, prices of pulses, vegetables, eggs, meat and fish pushed the retail food inflation higher on a year-on-year (YoY) basis. In contrast, decline in the prices of sugar capped the overall food inflation.

Accordingly, the prices of pulses and its products increased by 6.94 per cent, vegetables by 6.90 per cent and meat and fish by 8.51 per cent.

On the other hand, prices of sugar and confectionery declined by 2.35 per cent.

The sub-category of food and beverages recorded a 2.96 per cent rise last month over August 2018. Among the non-food categories, the fuel and light segment's inflation decreased by 1.70 per cent in August 2019.

In other news, India's economic health showed signs of recovery as factory production expanded in July, whereas the country's August retail inflation remained largely subdued with a marginal rise.

India's factory output growth accelerated in July by 4.3 per cent from a rise of 1.17 per cent reported for June, but it remained lower than the 6.5 per cent achieved during the corresponding month of the previous fiscal.

The 'quick estimates' of the Index of Industrial Production (IIP) for July showed that manufacturing sector output rate rose 4.2 per cent in July from a year-on-year rise of 7 per cent.

On YoY basis, mining production grew 4.9 per cent from a rise of 3.4 per cent and the sub-index of electricity generation was 4.8 per cent higher from 6.6 per cent.

Among the six use-based classification groups, the output of primary goods, which has the highest weightage of 34.04, grew 3.5 per cent. The output of intermediate goods, which has the second highest weightage, zoomed 13.9 per cent.

While consumer non-durables output rose 8.3 per cent, consumer durables declined 2.7 per cent.

On IIP, Devendra Kumar Pant, Chief Economist, India Ratings and Research, said: "July 2019 IIP growth increased to two-month high of 4.3 per cent. Unlike June 2019, all three sectors -- mining, manufacturing and electricity -- contributed to IIP growth.

"However, it will be too early to term this as recovery and one has to wait for some more time and completion of the forthcoming festive season to judge whether the industrial recovery is there for real."

Aditi Nayar, Principal Economist, ICRA, said: "While the late surge in monsoon rains has narrowed the YoY gap in kharif sowing to a mild 0.6 per cent as on September 6, 2019, the flooding in certain areas has led to a continued rise in the prices of vegetables such as onions.

"This, in conjunction with an unfavourable base effect, is likely to contribute to a hardening of food inflation in the ongoing month."

Madhavi Arora, Economist, Edelweiss Securities, said: "The current growth-inflation mix has been favourable for counter-cyclical monetary stance... We see scope for more (monetary policy) easing."

Output of infrastructure or construction goods increased 2.1 per cent, but capital goods' production receded 7.1 per cent.

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