Consumer Inflation Worsens To 7.59% In January

Epoch Times

Epoch Times

A day after Finance Minister Nirmala Sitharaman listed a recovery in industrial output as one of the "green shoots" in the economy, government data showed industrial production contracted again in December 2019, even as retail inflation surged to an nearly six-year high of 7.59%.

According to the data, manufacturing sector output declined by 1.2 per cent compared to growth of 2.9 per cent in the same month a year ago.

Food inflation for January 2020 was 13.63%, slightly lower than the previous month's rate of 14.19%.

"The cumulative growth for the period April-December 2019 over the corresponding period of the previous year stands at 0.5 per cent".

The country's industrial output also contracted by 0.3% in December, weighed by a decline in the manufacturing sector, government data showed on Wednesday. Prior to this, in May 2014, retail inflation was at 8.33%.

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Retail inflation soared to a near six-year high in January while industrial output contracted in December, dragged down by weakness in manufacturing, electricity and capital goods.

The Index of Industrial Production (IIP) recorded a negative growth of 0.3% in December in comparison to the same month the previous year, according to the National Statistical Office (NSO).

IIP growth during April-December period of the current fiscal decelerated to 0.5% from 4.7% expansion in the same period of 2018-19.

During the month, inflation in vegetables improved to 50.19 per cent, as against 60.50 per cent in December 2019. "The internals of the food inflation are worrying, given a broad-based uptick across categories that tend to be sticky, such as proteins, and a narrower-than-expected reduction in the inflation for vegetable", said Nayar.

Meanwhile, prices in housing and health segments grew 4.2 per cent on annual basis, whereas education became costlier by 3.93 per cent during January 2020. It is the consecutive second month, that CPI has breached the upper band of RBI's inflation target. "Nevertheless, it is unlikely to materially alter the direction of monetary policy, with the MPC already having placed its forecast for the average CPI inflation in Q4 FY2020 at a high 6.5%. Due to higher inflation, RBI has been maintaining a status quo since Dec 2019, if inflation continues to hover above 6 per cent, we don't expect RBI to cut interest rate or change its accommodative policy stance", said Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services.

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