Retail inflation spikes to 3-month high in Feb, oil demand falls 5%

New Delhi: In a double whammy for the economy, retail inflation soared to a three-month high of 5.03 per cent in February on costlier food items, while industrial production growth re-entered the negative territory by contracting by 1.6 per cent in January.

The National Statistical Office (NSO) in the Ministry of Statistics and Programme Implementation (MoSPI) released the Quick Estimates of Index of Industrial Production (IIP) for January 2021 and Consumer Price Index (CPI) numbers for February 2021 on Friday evening.

According to another data released by Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas, India's fuel consumption fell for the second month in a row in February to its lowest since September as record-high prices hindered demand recovery. Petroleum product consumption fell 4.9 per cent to 17.21 million tonnes in February as demand for both petrol and diesel fell.

The CPI based retail inflation stood at 4.06 per cent in January. The previous high was witnessed at 6.93 per cent in November 2020. The rate of price rise in the food basket accelerated to 3.87 per cent in February, as against 1.89 per cent in the preceding month.

Inflation in the 'fuel and light' category remained elevated at 3.53 per cent during the month vis-a-vis 3.87 per cent in January.

The inflation print in 'oil and fats' segment moved up to 20.78 per cent from 19.71 per cent.

For fruits, it grew to 6.28 per cent from 4.96 per cent, while in case of vegetables, the rate of deflation was softer at (-)6.27 per cent against (-)15.84 per cent in the preceding month.

Among others, milk and products, pulses and products, and eggs had inflation prints at 2.59 per cent, 12.54 per cent and 11.13 per cent respectively. The corresponding rates were 2.73 per cent, 13.39 per cent and 12.85 per cent in January.

For health category, the rate of price rise was higher at 6.33 per cent as against 6.02 per cent and for 'transport and communication', it rose to 11.36 per cent from 9.32 per cent in January.

As per the data, the contraction in the IIP in January was mainly on account of a decline in output of capital goods, manufacturing and mining sectors.

The output of the manufacturing sector, which accounts for 77.6 per cent of the IIP, contracted by 2 per cent during the month under review, as against a growth of 1.8 per cent during the corresponding month last fiscal.

The worst performance was witnessed in the capital goods sector which showed a contraction of 9.6 per cent during January over a decline of 4.4 per cent during the same month in the previous fiscal.

NSO also revised upwardly the IIP number for December 2020 to 1.56 per cent from the earlier estimate of 1 per cent.

The factory output growth was in the negative territory in November 2020. It had posted an increase during September and October 2020.

Meanwhile, Petrol and diesel prices across the country rose to their highest levels last month before state-owned fuel retailers put on hold any further price increase ostensibly to contain political fallout for the ruling party in the ensuing Assembly elections in states like West Bengal.

Diesel, the most used fuel in the country, fell 8.5 per cent to 6.55 million tonnes while petrol consumption was down 6.5 per cent to 2.4 million tonnes. Naphtha sales remained unchanged but the sale of bitumen - used for making roads - was down 11 per cent.

Cooking gas LPG sales were up 7.6 per cent.with agency inputs