Aug retail inflation eases to 6.83%; IIP growth for July comes at 5.7%

The consumer price index (CPI)-based inflation for the month of August came at 6.83 per cent as against a high of 7.44 per cent in July, according to the data released by the National Statistical Office (NSO) on Tuesday.

It was at 7 per cent in August 2022. Food inflation fell to 9.94 per cent in August against 11.51 per cent in July. Rural inflation was on the higher side at 7.02 per cent, compared to urban inflation at 6.59 per cent in August.

The Reserve Bank of India (RBI) has projected the CPI-based inflation at 5.4 per cent for 2023-24.

Aditi Nayar, Chief Economist, Head Research & Outreach, ICRA, said, "Offering a modicum of relief, the CPI-based inflation eased below the 7 per cent mark in August 2023 to a lower-than-expected 6.8 per cent, largely led by vegetables, amidst some moderation in the prints for clothing and footwear, housing and miscellaneous items as well."

"While we expect the CPI inflation to print in the range of 5.3-5.5 per cent in September 2023, this will still entail an average of 6.6 per cent for Q2 FY2024, well above the MPC's August 2023 forecast for this quarter. We expect the MPC to remain on hold in October 2023, while continuing to demonstrate caution amid a cloudy outlook for food inflation and elevated crude oil prices."


 

           

CPI Trends

General and food inflation (% Y-o-Y)

           

Note: Data for Aug 2023 provisional

   

Source: NSO

   

In the index of industrial production (IIP) growth for July came at 5.7 per cent vs 4.8 per cent in June.

For July 2023, the IIP stood at 142.0. For mining, manufacturing and electricity sectors for the month of July, the IIP came at 111.9, 141.2 and 204.0 respectively.

Factory output measured in terms of the Index of Industrial Production (IIP) grew by 2.2 per cent in July 2022. The data released by the National Statistical Office (NSO) showed that the manufacturing sector's output increased by 4.6 per cent in July 2023.

Mining output rose 10.7 per cent during the month under review. Power output grew eight per cent in July 2023. The IIP grew by 4.8 per cent in April-July 2023 compared to 10 per cent in the same period of 2022.

"The IIP print for July 2023, at 5.7 per cent, exceeded our expectations, on account of a better-than-expected performance of the manufacturing sector. The YoY performance of most available high-frequency indicators improved in August 2023 relative to July 2023, including freight and electricity generation. Based on these trends and a favourable base (-0.7 per cent in August 2022), ICRA expects the YoY IIP growth to witness an uptick to ~5-7 per cent in August 2023", Nayar added.

 

IIP Trends: Annual and Monthly

Note: Data for July 2023 provisional

Source: NSO