Retail inflation eases to 6.71 per cent in July

NEW DELHI: Here is a piece of good news on economy. The consumer price index-based retail inflation has marginally eased to 6.71 per cent in July as against 7.01 per cent recorded in June due to fall of food prices, while India’s industrial production rose to 12.3 per cent in June 2022 owing to good performance of manufacturing and mining sectors.

In the first three months of the current fiscal, retail inflation remained above seven per cent. The RBI has already raised interest rates by 140 basis points (bps) so far this year to 5.40 per cent. To contain inflation, it is also expected that interest rate would be raised further in the coming months too. Even RBI Governor Shaktikanta Das had said that inflation might not fall from the upper end of its mandated target band of six per cent until December this year.

Easing food prices, which account for nearly half of the consumer price index basket, and fuel costs helped lower the pace of increase in price pressures. However, the data showed that food inflation in July 2022 moderated to 6.75 per cent, compared to 7.75 per cent in June.

As the central bank factors in the retail inflation print at its bi-monthly monetary policy outcome, the Centre has tasked RBI to ensure inflation remains at 4 per cent with a margin of 2 per cent on either side. Even economists and experts said despite a marginal fall, core inflation remains elevated.

“CPI headline inflation for July has moderated in line with our expectations, led largely by food inflation, while the core inflation remains elevated and sticky. The coming few readings are expected to be a tad above 7 per cent with inflation likely to hover above RBI’s upper threshold limit of 6 per cent until January 2023. We expect Repo rate at 6 per cent by end of 2022, followed by a pause and a shift to neutral policy stance,” said Upasna Bhardwaj, chief economist at Kotak Mahindra.

Meanwhile, India’s industrial growth, as per the Index of Industrial Production (IIP), grew 12.3 per cent in June 2022 due to good performances, mostly in manufacturing and mining sectors. The IIP, however, fell in June as against 19.6 per cent in May. The industrial output growth in June 2021 was 13.8 per cent, the data showed.

As per the data, the manufacturing sector’s output grew 12.5 per cent in June 2022. “The mining output also climbed to 7.5 per cent, and power generation increased 16.4 per cent in June 2022 as well,” the data showed.

Industrial growth prints in both May 2022 and June 2021 were high, courtesy favourable base effects. In June 2021, IIP growth was high on account of economic activity coming to a halt in the comparative period of June 2020 because of the nationwide lockdown imposed to curb the spread of the Coronavirus pandemic.