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Thursday, October 29, 2020

Retail inflation at 8-month high in Sept; Aug IIP stays in negative

The inflation rate based on the Consumer Price Index (CPI) was at 6.69 per cent in August and 3.99 per cent in September last year.

By: ENS Economic Bureau | New Delhi | October 13, 2020 4:48:25 am
retail inflation, food inflation, retail inflation on food, economy news, business news, indian expressFactory output continued to decline for the sixth consecutive month in August

Retail inflation jumped to an eight-month high of 7.34 per cent in September, primarily driven by higher food inflation, which rose to double-digit levels, data released by the National Statistical Office (NSO) on Monday showed.

Factory output continued to decline for the sixth consecutive month in August, recording an 8 per cent contraction, mainly due to degrowth in manufacturing, capital goods, and consumer durables output, but showed a sequential improvement from 10.8 per cent contraction in the previous month, separate set of data released by the NSO showed.

The inflation rate based on the Consumer Price Index (CPI) was at 6.69 per cent in August and 3.99 per cent in September last year. Food inflation based on the Consumer Food Price Index rose to 10.68 per cent in September from 9.05 per cent in August, with urban food inflation at a higher print of 10.94 per cent compared with rural inflation print of 10.60 per cent. At 7.34 per cent, the inflation print is much above the Reserve Bank of India’s medium term target of 4+/- 2 per cent. Core inflation, which excludes impact of food and fuel inflation, however, softened to 5.67 per cent in September from 5.77 per cent in August.

The RBI in its Monetary Policy statement last week had said that prices of key vegetables like tomatoes, onions and potatoes should ebb by October-December with kharif arrivals, even though prices of pulses and oilseeds are likely to remain firm due to elevated import duties. It has projected CPI inflation to average at 5.4 per cent in October-December and 4.5 per cent in January-March.

The Index of Industrial Production (IIP) has shown sequential improvement, but cumulatively, it has contracted by 25 per cent for April-August against a growth of 2.4 per cent in the same period last year. The IIP had contracted by 1.4 per cent in August last year. “With the gradual relaxation of restrictions, there has been a relative improvement in the economic activities by varying degrees as well as in data reporting,” the NSO said. Manufacturing sector, which has a weight of 77.6 per cent in IIP, contracted 8.6 per cent in August, an improvement from 11.6 per cent contraction in July.

Consumer durables and consumer non-durables ouput, indicators for consumption demand, contracted 10.3 per cent and 3.3 per cent, respectively, in August. Output of capital goods contracted 15.4 per cent during August.

Economists said though economic activity has picked up, it is yet to reach per-Covid levels and the road to full recovery is distant and will also be largely contingent upon the infection rate. “Though economic activities are yet to reach the pre-Covid level, it is gaining traction with each passing month albeit at a reduced pace,” Sunil Kumar Sinha, principal economist, India Ratings and Research, said.

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