Retail inflation eases to 6.58%, industrial production quickens

Food inflation abates; faster output growth in mining, manufacturing

Retail inflation based on the Consumer Price Index slowed to 6.58% in February, while the industrial production growth as measured in the Index of Industrial Production (IIP) quickened to 2% in January amid subdued performance by the manufacturing sector, official data released on Thursday showed.

Retail inflation, which was 7.59% in January 2020 and 2.57% in February 2019, slowed mainly due to easing food prices. Inflation in the food basket was 10.81% February 2020, lower from 13.63% in the previous month, as per data from Ministry of Statistics and Programme Implementation.

The government has mandated the central bank to keep inflation at 4% with a margin of two percentage points on on either side.

“The moderation in inflation has expectedly been led largely by food inflation while core inflation remains muted amid tepid demand,” Upasna Bhardwaj, Economist at Kotak Mahindra Bank said. “We expect the inflation trajectory to continue to moderate going ahead led by deflationary trends from falling crude oil prices, lower food prices and weak demand.”

She added that with domestic and global growth expected to face downside risks from the spread of COVID-19 and deflationary forces emerging, “we see room for up to 50 bps of rate cut by the MPC, with any further easing contingent on the evolving growth environment.”

The IIP had accelerated 1.6% in January 2019. For January 2020, official data showed that the mining sector output grew 4.4% against a rise of 3.8%, manufacturing output rose 1.5% compared with 1.3% in the year-ago month, and electricity generation rose 3.1% versus 0.9% in January 2019.

Cumulative IIP growth for the period April-January 2019-20 over the corresponding period of the previous year stands at 0.5%, as against a growth of 4.4% in the corresponding period of 2018-19.

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