Inflation up, but factory output dips

New Delhi: With a moderation in food prices, the country’s retail inflation grew to 2.57 per cent in February, marginally higher than the previous month’s 2.05 per cent and sharply lower than 4.4 per cent in the same month last year, government data released on Tuesday showed. But factory output weakened, with the Index of Industrial Production (IIP) recording 1.7 per cent growth in January, steeply down from 7.5 per cent a year ago.

The latest price data released by the Central Statistics Office (CSO) showed that the Consumer Price Index (CPI)-based inflation, which measures changes in shop-end prices, remained comfortably within the RBI’s target level of 4 per cent.

However, food inflation based on CPI, however, was negative at 0.66 per cent. The headline retail inflation rate, which the RBI monitors for interest rate decisions, is currently barely above the RBI’s lower tolerable limit of 2 per cent.

In its monetary policy review last month, the RBI had projected that consumer price inflation, the primary price gauge that it tracks for interest rate decisions, will be around 3.2-3.4 per cent during April-September 2019, reflecting the current low inflation levels and benign food price outlook.

RBI governor Shaktikanta Das in its monetary policy review had said, “The decisions of the monetary policy committee in this regard will be data driven and in consonance with the primary objective of monetary policy to maintain price stability while keeping in mind the objective of growth.”

However, the factory production data, coming ahead of the RBI’s monetary policy statement on April 4, may increase the clamour for yet another cut in interest rates to boost economic activities. The deceleration in GDP growth rate to 6.6 per cent in October-December and the comfortable inflation level could also be cited for a rate cut.

CSO said the capital goods segments, considered barometers of investment, witnessed a contraction in January and so did the intermediate goods segment.