India’s retail inflation measured by the Consumer Price Index (CPI) moderated at 6.83 percent in August due to a sharp decline in food prices led by vegetables and additives, data compiled by compiled by the National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation (MoSPI). showed. However, prices of pulses and cereals remained elevated in August on account of the seasonal rain-hit supply disruptions.
Both on annual and month-on-month bases, India’s retail inflation eased in August from the levels of 7.44 percent in July and 7 percent in the corresponding month of the previous year. However, the CPI inflation remained above the RBI’s (Reserve Bank of India’s) tolerance limit of 6 percent for the second consecutive month in a row. In case the retail inflation remains around 7 percent for a long time, the RBI may try to cool it down with an increase in the cash reserve ratio (CRR), as seen in the past.
While overall rural inflation rose to 7.02 percent, urban CPI grew by 6.59 percent. Food inflation which accounts for nearly half of the overall consumer price basket, rose to 9.94 percent, a phenomenal increase from 2.91 percent growth reported in the sequential previous month.
| India’s retail inflation (Consumer Price Index or CPI) (%) |
| Month | 2020 | 2021 | 2022 | 2023 |
| January | 7.50 | 4.06 | 6.01 | 6.52 |
| February | 6.58 | 5.03 | 6.07 | 6.44 |
| March | 5.84 | 5.52 | 6.95 | 5.66 |
| April | 7.22 | 4.23 | 7.79 | 4.70 |
| May | 6.27 | 6.30 | 7.04 | 4.31 |
| June | 6.23 | 6.24 | 7.01 | 4.87 |
| July | 6.73 | 5.59 | 6.71 | 7.44 |
| August | 6.69 | 5.30 | 7.00 | 6.83 |
| September | 7.27 | 4.35 | 7.41 | |
| October | 7.61 | 4.48 | 6.77 | |
| November | 6.93 | 4.91 | 5.88 | |
| December | 4.59 | 5.59 | 5.72 | |
Source: Ministry of Statistics and Programme Implementation (MoSPI)
Madan Sabnavis, Chief Economist, Bank of Baroda, stated, “CPI inflation at 6.83 percent is on expected lines with our estimates at 6.9 percent. Food components that continue to worry are cereals, pulses, milk, spices, and vegetables. However, based on trends seen in the past two weeks or so, vegetable inflation should come down sharply, thus bringing down food inflation further. A higher share of food in the rural basket has kept the CPI inflation number elevated in August though lower than last month.”
Pulses inflation is something to watch out for considering that kharif sowing is lower this year than the previous year. Cereals inflation too would be under pressure given that excess rains have damaged some parts of the crop in the northwest region. While core inflation is stable at 4.8 percent, it has been seen that within the miscellaneous category, inflation remained high in personal care, health, and education segments. Higher input costs as well as revision in prices (education) is showing in the inflation numbers.
Importantly, the recent measure to lower liquefied petroleum gas (LPG) prices will have a 0.2-0.25 percent impact on inflation in September. “While inflation for September will move towards the 6 percent mark and probably go lower, this will not be very comforting yet for monetary policy. The RBI is likely to hold on to the repo rate and stance under these conditions. Chances of a rate hike are kept aside under the declining inflation scene,” said Sabnavis.
The National Statistics Office (NSO) reported India’s GDP growth last week at 7.8 percent for the April-June quarter, marking the sharpest surge in the world during that period. This record growth was achieved despite several headwinds, including high retail inflation and vagaries in the monsoon that may affect rural demand for fast-moving consumer goods (FMCG) products. High interest rates lowered overall demand sentiment during the April-June quarter. India’s economic performance, however, outshone the multiple challenges currently facing economies around the world.
IIP rises 5.7% in JulyIndia’s factory output or the Index of Industrial Production (IIP) surged by 5.7 percent in July, a substantial increase from 3.7 percent in June 2023, according to data released by the MoSPI on Tuesday. The IIP was reported at 2.2 percent in the comparable month of the previous year. According to the MoSPI data, mining output for July 2023 jumped to 10.7 percent, a substantial increase from (-)3.3 percent in the same month a year ago.
The manufacturing sector output grew by 4.6 percent in July this year, compared to 3.1 percent in July the previous year. Similarly, India’s electricity output reported a growth of 8 percent in July 2023 as against 2.3 percent in July 2022.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
