Retail inflation eases to 6.71% in July; IIP grows 12.3% in June

Despite declining to its lowest level since February 2022, the CPI continues to remain above the Reserve Bank of India’s (RBI) upper margin of 6 per cent for the seventh consecutive month. The government has mandated the central bank to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for a five-year period ending March 2026.

The CPI data is mainly factored in by the RBI while making its bi-monthly monetary policy. In a bid to check the raging inflation, the Monetary Policy Committee (MPC) of the central bank last week hiked the repo rate by 50 basis points (bps) to 5.40 per cent.

While announcing the decisions of the MPC meeting last week, RBI Governor Shaktikanta Das had said that retail inflation remains uncomfortably high and noted that inflation is expected to remain above 6 per cent. He said that the inflation projection of the central bank is retained at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.4 per cent; and Q4 at 5.8 per cent, and risks evenly balanced.

The Consumer Food Price Index (CFPI) or the inflation in the food basket too showed a month-on-month fall during July to 6.75 per cent, from 7.75 per cent in June, the data revealed.

Prices of vegetables rose 10.90 per cent on year in July. Apart from this, the spices saw a rise of 12.89 per cent while that cereals and products gained 6.90 per cent and oils and fats rose 7.52 per cent. Egg prices slipped (-)3.84 per cent however fruits grew 6.41 per cent.

Apart from food and beverages, the fuel and light segment rose 11.76 per cent, clothing and footwear gained 9.91 per cent and the housing segment inched up 3.90 per cent.

Industrial output (IIP)

India’s factory output, which is measured in terms of IIP witnessed a growth of 12.3 per cent on-year to 137.9 during the month of June, a separate data released by the MoSPI showed.

The IIP had risen 13.8 per cent in June 2021, the data showed.

The industrial growth so far in the fiscal year 2022-23 (April-June) has surged 12.7 per cent, compared to a contraction of spike of 44.4 per cent in the corresponding period a year ago, the data showed.

The growth in IIP data during June was led by manufacturing and electricity sectors. The electricity sector rose 16.4 per cent on-year to 196.9 in June. It was followed by the manufacturing sector that witnessed a growth of 12.5 per cent to 136.3. The mining sector saw a 7.5 per cent growth to 113.4, the MoSPI data showed.

In June last year, the manufacturing sector had witnessed a rise of 13.2 per cent. During the same month, the mining sector had surged 23.1 per cent, while the electricity sector had witnessed a growth of 8.3 per cent, the data showed.