Rising for the sixth consecutive month, retail inflation for June reached 3.18 per cent — remaining well within the comfort zone of the Reserve Bank of India — leaving scope for a rate cut by the central bank to bolster industrial production which is yet to gain traction.
As per data released by Central Statistics Office (CSO), factory output growth based on Index of Industrial Production (IIP) fell to 3.1 per cent in May as against 4.3 per cent in April, mainly due to subdued performance of mining and manufacturing sectors.
Retail inflation based on Consumer Price Index (CPI) inched up to 3.18 per cent in June, from 3.05 per cent in May, primarily due to firming prices in the food basket, another set of data released by CSO revealed. The Reserve Bank mainly considers retail inflation while deciding its monetary policy.
However, the data also indicated that inflation in vegetables and fruits segments eased over the previous month.
It added that overall food inflation based on consumer food price index rose to 2.17 per cent in June as against 1.83 per cent in the previous month.
In the ‘pulses and products’ category, the rate of price rise was sharply higher at 5.68 per cent against 2.13 per cent, while inflation in the ‘cereals and products’ basket rose to 1.31 per cent from 1.21 per cent in May.
On the factory output front, the CSO data showed that expansion in the mining sector was merely 3.2 per cent in May, as compared to 5.8 per cent in the year-ago month.
Similarly, growth in the manufacturing sector was also subdued at 2.5 per cent in May, compared to 3.6 per cent in the corresponding month of the last financial year. However, the power generation grew at 7.4 per cent in May, as against 4.2 per cent in the same month last year.
Earlier in the day, while replying to a general discussion on the Union Budget 2019-20 in the Rajya Sabha, Finance Minister Nirmala Sitharaman said the government has succeeded in keeping “complete control” over retail inflation.
“Inflation has never been allowed to raise its dirty head to cause inconvenience to the consumers…complete control over inflation is the achievement of this Government…,” she said.
The RBI has been tasked by the government to ensure the rate of price rise remains around 4 per cent.
While reducing the repo in June by 25 basis points for the third time in a row, the central bank had left the door ajar for more rate cuts.