IIP, inflation numbers offer Centre respite amid rupee, fuel tantrums

The industrial output and consumer price index-based inflation numbers on Wednesday provided a breather to the Centre, facing flak for its alleged mishandling of the rupee and petroleum prices. 

Fuel inflation, however, continued unabated, rising to 8.47 per cent in August from 7.96 per cent in July. Though the growth rate in the Index of Industrial Production (IIP) marginally fell to 6.6 per cent in July from 6.8 per cent in June, it was at an elevated level and much higher than market expectations of 5 per cent. Manufacturing growth, which had risen in double digits in the GDP data, was up at 7 per cent in July compared with 6.9 per cent in the previous month. The inflation rate declined to a 10-month low of 3.69 per cent in August, with food items showing a fall in prices in urban areas for the second month in a row. This indicated that farmers were not getting remunerative prices for their produce. 

The rate cuts in the GST on over 100 items from July 27 pulled down the inflation rate. With inflation risks from the rupee depreciation, higher petroleum prices and crop procurement prices, some economists see a possibility of a third consecutive rate hike by the RBI.