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Retail inflation eases to 4.59% in Dec; IIP slips -1.9% in Nov: Govt data

CPI Inflation Rate December, IIP Growth Rate November 2020: The retail inflation, measured through the Consumer Price Index (CPI) rose by 4.59 per cent in December. Separately, the factory output, which is measured in terms of Index of Industrial Production (IIP), contracted by -1.9 per cent in November.

By: Express Web Desk | New Delhi |
Updated: January 12, 2021 6:29:10 pm
Vegetable vendors wear protective masks while waiting for customers at a market during a lockdown imposed due to the coronavirus in Mumbai, India, on Sunday, April 5, 2020. (Photographer: Dhiraj Singh/Bloomberg)

India CPI Inflation, IIP Growth Rate: The country’s retail inflation, which is measured by the Consumer Price Index (CPI), eased to 4.59 per cent in the month of December mainly due to decline in food prices. Separately, India’s factory output, measured in terms of Index of Industrial Production (IIP), witnessed a contraction of -1.9 per cent in November, two separate data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed on Tuesday.

The retail inflation for the month of November was 6.93 per cent.

The December CPI data has come within the Reserve Bank of India’s (RBI) upper margin of 6 per cent. The government has mandated the central bank to keep retail inflation within the range of 4 per cent with a margin of 2 per cent on either side.

RBI primarily factors in retail inflation while making its bi-monthly monetary policy. In its bi-monthly monetary policy meeting last month, the Indian central bank had kept its key interest rates unchanged and decided to maintain an ‘accommodative stance’ as long as necessary at least through the current financial year.

The decline in retail inflation in December was mainly due to easing food prices. The Consumer Food Price Index (CFPI) or the inflation in the food basket eased to 3.41 per cent in the month of December, down from 9.50 per cent in November, the data revealed.

The 3.41 per cent growth in the food basket was due to a fall in vegetable prices that slipped -10.41 per cent on-year rise in December. Apart from vegetables, other prices were however positive. The oils and fats segment saw a rise of 20.05 per cent, while that of eggs rose 16.08 per cent and pulses and products prices gained 15.98 per cent. The meat and fish segment also witnessed a rise of 15.21 per cent.

“CPI inflation has been above RBI’s upper bound inflation target of 4 +/-2 per cent for more than 11 months. The recent rise in commodity prices with pick up in the global economy and depreciating dollar exerts cost-push pressures, keeping inflation near 5-6 per cent levels in the near term. Additionally, a broad-based domestic and global economic recovery should improve aggregate demand, posing an upside risk to inflation. On the other hand, favorable base effect, appreciating rupee and any risk of second or third wave of covid led slowdown, will be a tailwind for CPI inflation. Overall, we expect inflation to average between 5-6 per cent in CY21,” Rupen Rajguru, Head of Equity Investments & Strategy at Julius Baer India, said in a statement.

Index of Industrial Production (IIP)

India’s factory output, which is measured in terms of IIP witnessed a contraction of -1.9 per cent on-year to 126.3 during the month of November, separate data released by the MoSPI showed.

The IIP had grown/slipped 2.1 per cent in November 2019, the data showed.

The industrial growth so far in the fiscal year 2020-21 (April-November) has contracted -15.5 per cent, compared to a 0.3 per cent rise in the corresponding period a year ago, the data showed.

The contraction in IIP data during November is primarily on account of the mining and manufacturing sectors. The mining sector saw a decline of -7.3 per cent on-year to 104.5 in November, while the manufacturing sector witnessed a fall of -1.7 per cent to 128.4. However, the electricity sector grew 3.5 per cent to 144.8, the MoSPI data showed.

In November last year, the manufacturing sector had witnessed a growth of 3.0 per cent. During the same period, the mining sector had risen 1.9 per cent, while the electricity sector had witnessed a fall of -5.0 per cent, the data showed.

Reacting to the IIP figures, Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services said, “It was obvious that the industrial growth will contract after the output in eight-core sector slumped. Overall the industrial recovery continues to be uneven and fragile and will require the stimulus support to stay in momentum.”

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