Rising costs.

Rising costs.

Up and up; retail inflation at all-time high; high food, fuel costs push it to 7.6%

Retail inflation was at 1.97 per cent in the corresponding month of last year

Agency Report | New Delhi | 12 February, 2020 | 11:00 PM

Retail inflation in India rose to the highest since May 2014, pushed up by expensive food items and higher telecom tariffs. Consumer Price Index inflation stood at 7.59 per cent in January 2020 compared to 7.35 per cent in December 2019, according to data released by the Ministry of Statistics and Programme Implementation on Wednesday. Inflation in food and beverages rose to 11.8 per cent as compared to 12.2 per cent in December 2019.

Higher prices of food items such as vegetables, eggs, meat and fish, along with fuel costs, pushed India’s retail inflation during January to 7.59 per cent from December’s 7.35 per cent.

The consumer price index (CPI), or retail inflation, was at 1.97 per cent in the corresponding month of last year.

According to the National Statistical Office, the consumer food price index remained at an elevated levels of 13.63 per cent, up from minus 2.24 per cent recorded in January 2019.

Similarly, the high fuel prices lifted the inflation rate of the ‘fuel and light’ category to 3.66 per cent.

The data showed that the retail inflation level continues to remain much above the RBI’s medium-term target for the CPI rate of 4 per cent with a band of +/- 2 per cent.

Product-wise, prices of vegetables, eggs, meat, fish and pulses pushed the retail inflation higher on a year-on-year (YoY) basis.

Prices of vegetables in January increased 50.19 per cent, meat and fish by 10.50 per cent, eggs by 10.41 per cent and pulses and their products by 16.71 per cent.

“The sharp spike in food inflation has led India’s January CPI to breach a six-year high of 7.59 per cent compared to 7.35 per cent seen in December,” said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

“Due to higher inflation, RBI has been maintaining a status quo since December 2019. If inflation continues to hover above 6 per cent, we don’t expect RBI to cut its interest rate or change its accommodative policy stance.”

Decline in manufacturing activity contracted India’s December factory output by 0.3 per cent from a rise of 1.82 per cent in November and 2.5 per cent during the corresponding period of the previous year.

“The ‘Quick Estimates of Index of Industrial Production’ with base 2011-12 for the month of December 2019 stands at 133.5, which is 0.3 per cent lower as compared to the level in the month of December 2018,” the Ministry of Statistics & Programme Implementation said.

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

As per the data, the output rate of the manufacturing sector contracted by minus 1.2 per cent in December from a YoY rise of 2.9 per cent.

The output of other notable sector such as mining rose, whereas electricity slipped during the month under review.

According to the data, mining activity grew by 5.4 per cent from a YoY decline of (-) 1 per cent and the sub-index of electricity generation was lower by (-)1 per cent from a rise of 4.5 per cent.

Among the six use-based classification groups, the output of primary goods, which has the highest weightage of 34.04, rose by 2.2 per cent. The output of intermediate goods, which has the second highest weightage, zoomed 12.5 per cent.

While consumer non-durables output fell by (-) 3.7 per cent, similarly, the consumer durables declined (-)6.7 per cent.

Output of infrastructure or construction goods decreased by (-) 2.6 per cent, similarly, capital goods’ production receded by (-)18.2 per cent.

In terms of industries, 16 out of the 23 industry groups in the manufacturing sector showed negative growth during the month under review as compared to the corresponding period of the previous year.

“The industry group ‘manufacture of computer, electronic and optical products’ has shown the highest negative growth of (-) 24.9 per cent followed by (-) 20.3 per cent in ‘manufacture of machinery and equipment n.e.c.’ and (-) 15.5 per cent in ‘printing and reproduction of recorded media’,” the Ministry said.

“On the other hand, the industry group ‘manufacture of basic metals’ has shown the highest positive growth of 14.2 per cent followed by 13.2 per cent in ‘manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials’ and 5.9 per cent in ‘manufacture of leather and related products’.” (IANS)