Retail inflation climbed to a four-month high of 4.87 per cent in May on rising prices across the categories of food, clothing and footwear, housing and fuel and light, cementing RBI’s concerns about inflation which had prompted it to hike the key policy rate by 25 basis points last week.
Data released by Central Statistics Office (CSO) on Tuesday showed that the industrial output growth rose to 4.9 per cent in April due to growth in manufacturing, mining sectors along with a favourable base effect for consumer durables and capital goods.
At 4.87 per cent, the inflation rate based on Consumer Price Index (Combined) is still within the Reserve Bank of India’s (RBI) inflation rate projection of 4.8-4.9 per cent in April-September. Economists said the headline inflation is set to cross 5 per cent mark in coming months. “Headline inflation remains on track to cross 5 per cent in the next reading, peaking at around 5.3 per cent in June 2018, followed by a base effect led softening in the subsequent months,” ICRA’s principal economist Aditi Nayar said.
In CPI, food and beverages inflation rate rose to 3.37 per cent in May from 3 per cent in the previous month and the Combined Food Price inflation for May also increased to 3.10 per cent from 2.80 per cent in April. Inflation rate for other categories such as fuel and light inched higher to 5.80 per cent in May from 5.24 per cent in April, while that for clothing and footwear increased to 5.47 per cent from 5.11 per cent.
Inflation for housing eased to 8.40 per cent in May from 8.50 per cent in the previous month after registering a sustained increase since July 2017.
Core-core (excluding food, fuel & light and transport & communication) inflation increased to 45-month high of 6.17 per cent, as per India Ratings. “Decision of oil producing countries in next week meeting will be crucial. Food inflation is contingent upon the progress of 2018 monsoon over space and time. An even spread over space and time will reduce pressure on food inflation,” Devendra Kumar Pant, Chief Economist, India Ratings said.
Industrial growth, measured by the Index of Industrial Production (IIP), grew to 4.9 per cent in April from 3.2 per cent in April last year and 4.6 in March this year. The manufacturing sector, which constitutes more than 77 per cent of the index, recorded a growth of 5.2 per cent in April, up from 2.9 per cent in the year ago month. The mining sector expanded by 5.1 per cent, up from 3 per cent in April 2017.
The growth in electricity, however, slipped to 2.1 per cent in April this year from 5.4 per cent in the corresponding period a year ago. Consumer durables and capital goods, having a low base, grew at 4.3 per cent and 13.0 per cent, respectively, in April. Consumer non-durables growth slowed to 7.0 per cent in April from 8.8 per cent in the same period last year.
The industry group ‘Manufacture of computer, electronic and optical products’ recorded the highest positive growth of 27.5 per cent followed by ‘Manufacture of motor vehicles, trailers and semi-trailers’ at 21.9 per cent. Item groups which registered high positive growth during April included ‘Sugar’ (156.5 per cent), ‘Construction machine/ equipment (including bulldozers and road rollers)’ (110.4 per cent), ‘Stainless steel utensils’ (101.7 per cent).
Item groups that registered fall in growth included ‘Jewellery of gold (studded with stones or not)’ (-75.1 per cent), ‘Antimalarial drugs’ (-65.9 per cent), ‘Air filters’ (-52.2 per cent), ‘Copper bars, rods & wire rods’ (-40.9 per cent), ‘Telephones and mobile instruments’ (-38.4 per cent), the data showed.