Logo


Inflation cools to 10-month low; industrial output expands by 6.6 pc

Retail inflation cooled to a 10-month low in August on cheaper food items while industrial output expanded by 6.6 per cent in July, official data showed Wednesday.

The good news on the inflation and factory output front comes amid falling rupee and rising petrol and diesel prices.

The RBI, which is struggling to stem rupee depreciation, will be factoring in the data while deciding the interest rate at its next bi-monthly monetary policy meeting on October 5.

Consumer Price Index (CPI) based inflation fell to 3.69 per cent in August on the back of easing prices of fruits, vegetables and other food items, as per data released by the Central Statistics Office (CSO).

Retail inflation was at 4.17 per cent in July and 3.28 per cent in August 2017.

The previous low for CPI inflation was in October 2017, when it stood at 3.58 per cent. Inflation remained above RBI's targeted rate of 4 per cent since then.

As per the CSO, rate of price rise in the food basket fell significantly to 0.29 per cent in August 2018 as against 1.37 per cent in the previous month.

Vegetable prices declined by 7 per cent in the month under review. The rate of price rise in fruits stood at 3.57 per cent, compared to around 7 per cent in July.

However, there was a moderate increase in inflation in the fuel and light segment. It rose to 8.47 per cent in August compared to about 8 per cent in July.

Commenting on the inflation numbers, Economic Affairs Secretary Subhash Chandra Garg tweeted: "August consumer price index at 3.69% (down from 4.17% in July) indicates further moderation in retail inflation. Food inflation in August at .29% only guards majority of poor people from any rise in prices. Sound Indian macroeconomic story continues."

The CSO data on Index of Industrial Production (IIP) showed that factory output grew at 6.6 per cent in July on the back of good performance by the manufacturing sector and higher offtake of capital goods and consumer durables.

Industrial production had expanded by just 1 per cent in July 2017. The expansion was at 6.8 per cent (lower than provisional estimate of 7 per cent) in June 2018.

The manufacturing sector recorded 7 per cent growth in July as against a contraction of 0.1 per cent in the same month a year ago.

The consumer durables sector recorded an impressive growth of 14.4 per cent in July against a dip of 2.4 per cent year ago. Capital goods production grew by 3 per cent in July as against a decline of 1.1 per cent earlier.

The IIP growth in April-July period was 5.4 per cent compared to 1.7 per cent last year.

In terms of industries, 22 out of 23 industry groups in the manufacturing sector showed positive growth during July 2018.

In another tweet, Garg said: "IIP growth also marches on strongly at 6.6% in July 2018. More noteworthy is IIP growth in manufacturing at 7%. Average IIP growth in first four months has been a decent 5.4%".

Shubhada Rao, Chief Economist with Yes Bank, said the CPI print in August is in line with expectations.

"We expect CPI around 4 per cent next month. Today's lower print however has been overshadowed by market volatility," she said.

Meanwhile, Commerce and Industry Minister Suresh Prabhu said India's exports grew by 19.21 per cent to USD 27.84 billion in August on account of healthy performance by sectors such as petroleum.

"Export trade during August 2018 recorded at USD 27.84 billion, a positive growth of 19.21 per cent. Exports excluding Petroleum also reported a positive growth of 17.43 per cent," he said in a tweet.

Merchandise imports too rose by 25.41 per cent in August to USD 45.24 billion due to the rising crude oil prices, leaving a trade deficit of USD 17.4 billion.

In July, trade deficit soared to a near five-year high of USD 18.02 billion.

During April-August this fiscal, exports recorded a growth of 16.13 per cent, while the imports during the first five months of this fiscal grew by 17.34 per cent.