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Home » Economy » May retail inflation rises to 5%, so does April’s industrial output

May retail inflation rises to 5%, so does April’s industrial output

By Newsd
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August inflation down at 3.69%, July industrial output eases

New Delhi: High food and fuel prices lifted India’s May retail inflation close to the 5 per cent mark, even as the manufacturing sector pushed the country’s April industrial production higher by 4.9 per cent.

The macro-data points — Consumer Price Index (CPI) Numbers for May and the Quick estimates of index of Industrial Production for April — were released by the Central Statistics Office on Tuesday.

According to CSO, the CPI inflation in May stood at 4.87 per cent, registering more than double growth over the 2.18 per cent recorded in the same month last year, and up from the 4.58 per cent recorded in April 2018.

Accordingly, the consumer food price index (CFPI) in May moved up to 3.1 per cent over the 2.8 per cent logged in the previous month.

The annual CPI in rural areas in May ruled higher at 4.88 per cent, while in urban India, it rose by 4.72 per cent.

Further, the data revealed that retail inflation rate on a year-on-year (YoY) basis rose due to higher prices of food items like vegetables, milk-based products, eggs, meat and fish, as well as increased fuel rates.

On a sub-category basis, vegetables in May became costly by 8.04 per cent, while prices of milk-based products rose by 3.2 per cent.

Other notable sub-categories such as cereals became dearer by 2.78 per cent and meat and fish recorded a rise of 3.53 per cent.

The category of food and beverages during the month under consideration recorded a rise of 3.37 per cent over the same period last year.

Among non-food categories, the fuel and light segment’s inflation rate accelerated to 5.8 per cent in May.

As per the CSO data on IIP, higher production of the manufacturing sector, especially of capital goods and consumer durables, accelerated the country’s industrial output in April by 4.9 per cent from a rise of 4.57 per cent in March 2018.

The corresponding growth during April 2017 stood at 3.2 per cent.

Besides, the data showed that the sequential rise in factory output was mainly on account of higher production in the manufacturing sector.

On a YoY basis, the manufacturing sector expanded by 5.2 per cent, while the mining sector’s output rose by 5.1 per cent and the sub-index of electricity generation increased by 2.1 per cent.

In terms of industries, sixteen out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of April 2018 as compared to the corresponding month of the previous year, the CSO said.

The industry group ‘manufacture of computer, electronic and optical products’ has shown the highest positive growth of 27.5 per cent followed by 21.9 per cent in ‘manufacture of motor vehicles, trailers and semi-trailers’ and 15.7 per cent in ‘manufacture of food products’.

While the rise in consumer non-durables points the revival in rural sector, the increase in consumer durables posted a positive outlook for the urban centres, said industry body Assocham’s Secretary General D.S. Rawat.

Further, the rise in output of capital goods sector is indicative of improvement in investment demand, said Rawat.

In terms of CPI inflation, Rawat stated that higher oil prices and tighter financial conditions will weigh on the pace of acceleration.

As India imports over two-thirds of its crude requirement, any surge in crude prices has the potential to upset growth projection, he said.

ICRA’s Principal Economist Aditi Nayar said: Headline inflation remains on track to cross 5 per cent in the next reading, peaking at around 5.3 per cent in June 2018, followed by a base effect led softening in the subsequent months.

Nevertheless, the dispersion of the monsoon, the revision of MSPs, movement in crude oil prices and the INR as well as evolving fiscal risks, would crucially influence the inflation trajectory.

On industrial production, Deloitte India’s Lead Economist and Partner Anis Chakravarty said: … risks to factory output remain slightly to the upside on expectations of weakening rupee and higher input costs, however some balancing in data prints can be expected if pace of infrastructure and construction picks up as expected.