India’s Factory Output at 3-Year High, Retail Inflation Edges Up

Retail inflation quickened to 4.41% in September from 3.74% a month ago.

The Consumer Price Index (CPI) measure of inflation has hovered near that level since February and was 0.1% in July. Increased vehicle and shelter costs, along with a smaller reduction in airline fares, are expected to be behind the rise in the core CPI in September.

Among the various categories under the general index, the inflation percentage in September was higher in “clothing and footwear” at 6 percent, and “fuel and light” at 5.42 percent.

The price rise in spices category was higher at 9.27 per cent and for non-alcoholic beverages at 4.32 per cent. Break-wise; retail inflation rose to 5.05 per cent for rural segment in September and for urban sector it was at 3.61 per cent.

Instead, in a worsening of the crisis for millers, retail inflation in sugar fell further by 12.91 percent. The government revised upwards the August retail inflation to 3.74 percent from the earlier estimate of 3.66 percent. The focus must shift to bringing inflation to around 5 percent by the end of fiscal 2016-17, the bank said.

Likewise, milk and its products were also cheaper in September with inflation rate at 5.05%.

“Room for further rate cuts will depend on comfort of achieving 5 percent target in January-March 2017, and also developments in the global financial markets”, said Indranil Pan, chief economist at IDFC Ltd.

On the other hand, industrial production, as represented by Index of Industrial Production (IIP), grew to 6.4% in August 2015 compared with 4.2% growth recorded in the previous month.

“Despite high pulses inflation, most noteworthy point in today’s inflation number is resilience of food inflation and its ability to withstand adverse weather shock (2014 and 2015 sub-par monsoon)”. It is important that pro-active supply-side management by the government be in place to head off any food price pressures should they materialise, especially in respect of onion and pulses.