Retail inflation eases to 7.01% in June, industrial output grows 19.6% in May

India’s retail inflation, measured through Consumer Price Index (CPI), slightly moderated to 7.01% in June 2022 from 7.04% in May this year, shows government data shared on Tuesday. The headline inflation print was at 6.26% in the same month last year, reveals data shared by the National Statistical Office (NSO).

This marks the sixth month that retail inflation has remained above the tolerance band of 2-6% recommended by the Reserve Bank of India (RBI).

Inflation in food basket further declined to 7.75% in June, from 7.97% in May, following year-on-year decline in prices of eggs and pulses. Prices in the food basket, however, remained higher in consecutive terms for most products.

Rural inflation increased marginally to 7.09% in June from 7.08% in May. Urban inflation, however, saw a sharp downturn to 6.92% during the month under review from 7.08% in May 2022.

The only categories to see a price decline were eggs and pulses and products, where prices fell by 5.48% and 1.02%, respectively.

In June, prices in the oil and fats segment increased 9.36% year-on-year. In the penultimate week of June, the central government had announced that edible oil brands have reduced prices by ₹10-15, which has made the commodity more affordable, and will help control inflation.

Earlier this month, the government had asked FMCG brands to further reduce edible oil prices by another ₹10 within the week, in the backdrop of falling global prices. Benefits of these moves might appear in the headline inflation print of July.

Prices in the fuel and light segment increased 10.39% on-year in June, as transportation fuel costs remained high on account of high crude oil prices. Vegetable prices increased 17.37% during June 2022.

“The CPI inflation broadly remained steady around 7% bringing the Q1 FY23 average to 7.3% — marginally lower than RBI’s projections of 7.5%. Nonetheless, inflation is expected to remain elevated with only a gradual descent through the rest of the year. While the softening global commodity prices provide some relief, the gains will be limited due to weakening Indian rupee," says Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.

"We expect the MPC to continue to frontload policy rate hikes especially as global monetary tightening continues. We expect 85-110 bps of additional rate hikes in the coming few meetings to bring the repo rate towards 5.75-6% by end of FY23,” she further adds.

Meanwhile, industrial output, measured via Index of Industrial Production (IIP) increased 19.6% year-on-year during May 2022. For the April-May period of the current fiscal, industrial output increased 12.9%.

The indices of industrial production for the mining, manufacturing and electricity sectors for the month under review stand at 120.1, 134.5 and 199.9, respectively, marking growths of 10.9%, 20.6% and 23.5% in annual terms.

During May, output of primary goods increased 17.17%, while that of capital goods and intermediate goods increased 54% and 17.9%. Manufacturing of infrastructure and construction goods increased 18.2% during the month. Production of consumer durable goods recorded growth of 58.5%, whereas consumer non-durable goods increased merely 0.9%.