Retail inflation at four-month low, industrial output not so encouraging -Governance Now

Retail inflation at four-month low, industrial output not so encouraging

Fruits and vegetable prices increase at a slower pace in April

GN Staff | May 12, 2015

#inflation #retail inflation #food #fruits #vegetables #industrial output #rate cut #RBI

While retail inflation in April fell to a four-month low of 4.87 per cent, the annual growth in production at factories, mines and utilities slowed to 2.1 percent in March, the slowest pace since last October.

The retail inflation measured on the basis of Consumer Price Index (CPI) was revised upwards to 5.25 per cent from 5.17 per cent in March 2015.

Fall in food inflation was mainly driven by fruits, vegetables, milk and related products. However, inflation in prepared meals, snacks and sweets category rose to 7.68 per cent.

Prices of fruits and vegetables increased at a slower pace in April with inflation standing at 5.08 per cent and 6.63 per cent, respectively.

The rate of price rise in cereals and products was slower than a month ago at 2.15 per cent, while inflation in milk and its products was at 8.21 per cent.

Inflation in oils and fats category fell to 1.77 per cent in April, sugar and confectionery at (-)5.99 per cent, spices (8.70 per cent) and in non-alcoholic beverages it was 4.68 per cent.

This fall may result in interest rate cut by Reserve Bank of India next month. With inflation staying well below the 6 percent and growth momentum weakening, analysts feel that the RBI may lower lending rates for a third time this year.

The RBI has cut rates by a 50 basis points since January and is due to review them next month. It left rates unchanged in April, saying it would watch for transmission of previous rate cuts and price rises.

Consumer goods output has fallen in nine out of past 12 months. It shrank an annual 0.7 percent in March.
Industrial production grew at a five-month low of 2.1 percent in March even as both manufacturing activity and capital goods' offtake improved during the month.

The factory output, as measured by the Index of Industrial Production (IIP), had contracted by 0.5 percent in March 2014.

For 2014-15 fiscal, industrial production grew at 2.8 percent as against contraction of 0.1 percent in 2013-14, the data released by the Central Statistics Office today showed.

The IIP for February has also been revised downwards to 4.86 percent percent from the provisional estimate of 5 percent released last month.

The IIP had grown at 2.77 percent in January, 3.56 percent in December and 5.2 percent in November. The factory output contracted by 2.7 percent in October.

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