Inflation at 22-month-high 5.77%; factory output rise dips 50% to 1.2%

Retail inflation inched up to a 22-month high level of 5.77 per cent in June on increase in food prices including that of key kitchen staples like vegetables and cereals. With inflation remaining at an elevated level and above the 5 per cent mark, the Reserve Bank’s next monetary policy review in August would be keenly watched as inflation targeting has been the main objective of the apex bank. The retail inflation measured on Consumer Price Index (CPI) was marginally lower at 5.76 per cent in the previous month, while it was 5.40 per cent in June last year. In August 2014, consumer inflation was at 7.8 per cent.

The overall food inflation moved up to 7.79 per cent in June from 7.47 per cent in the previous month, Government data showed on Tuesday. Inflation in vegetables was up at 14.74 per cent against 10.77 per cent in May and in cereals and related products was 3.07 per cent compared to 2.59 per cent in the previous month. However, the rate of price rise in pulses declined to 26.86 per cent during the month while it stood at 31.57 per cent in May. Protein rich items, like meat, fish, eggs, milk saw a marginal decline in comparison to May.

Inflation in fuel and light basket was 2.92 per cent in June as against 2.94 per cent in the previous month. The Ministry of Statistics and Programme Implementation collects data from selected towns and villages to calculate CPI-based retail inflation. In its bi-monthly policy released last month, the RBI had maintained status quo in key policy rate, citing higher upside risks to the ‘inflation trajectory’. The retail inflation in rural areas was at 6.2 per cent and in urban areas it was 5.26 per cent in June, showed the data.

Industrial production grew by 1.2 per cent in May after seeing a contraction in the previous month, mainly due to an uptick in consumer durables output. Factory output, measured in terms of the Index of Industrial Production (IIP), had expanded by 2.5 per cent in May last year, the data released by the Central Statistics Office (CSO) showed on Tuesday. On cumulative basis, the factory output in April-May contracted by 0.1 per cent compared to 2.8 per cent growth in the year-ago period. Despite a rebound in May, the growth figure remained low and may add to the clamour for a rate cut by the Reserve Bank of India.

The provisional estimate of 0.8 per cent contraction in April this year was revised downwards to 1.34 per cent decline in factory output. According to data, output of consumer durables, which include white goods like television, refrigerators and washing machines, grew by 6 per cent in May compared to a contraction of 3.9 per cent in the same month a year ago. The manufacturing sector that constitutes over 75 per cent of the index saw a growth of 0.7 per cent in May compared to 2.1 per cent a year ago.

Power generation grew 4.7 per cent in May compared to 6 per cent in the same month a year ago. The mining sector recorded a growth of 1.3 per cent in May this year as against 2.1 per cent a year ago. In terms of industries, 14 out of 22 industry groups in the manufacturing sector have shown growth during May 2016.