Retail inflation in India has reached a three-month high of 4.8% in June due to rising food prices, particularly pulses, cereals, and related products. Meanwhile, industrial output growth has also increased to a three-month high in May, driven by the robust performance of the manufacturing sector.
According to data released by the National Statistical Office (NSO), the consumer price index (CPI) showed an annual increase of 4.8% in June, up from 4.3% in May. The food index rose to 4.5% during the month, compared to nearly 3% in May. Urban inflation stood at nearly 5%, while rural areas experienced inflation of 4.7%.
This increase in retail inflation after a four-month softening period poses a fresh challenge to policymakers. Experts predict that the Reserve Bank of India (RBI) will maintain interest rates at a pause for the rest of the year.
Rajani Sinha, chief economist at Care Edge, expressed concerns about the sequential momentum in food inflation. She highlighted that the share of food inflation in the headline inflation has risen from 36% to 44% in the previous month.
On the other hand, separate data revealed that industrial production (IIP) surged in May, reaching 5.2%. This growth was driven by the expansion in capital goods, infrastructure and construction goods, and consumer non-durables.
However, experts believe that the sector may encounter obstacles in the coming months.
Overall, the latest data on inflation and industrial output reflect a mixed economic landscape. While retail inflation is on the rise, industrial growth has improved. These contrasting trends present a challenge for policymakers as they strive to strike a balance between managing inflation and supporting economic recovery.
As a result of these developments, it is expected that the RBI will maintain a cautious approach towards interest rates, opting for a pause to assess the situation further. Meanwhile, the industrial sector may face potential hurdles in the upcoming months, requiring careful monitoring and supportive measures.
The current state of inflation and industrial output showcases the complexities of managing the economy during challenging times. The authorities will need to evaluate various strategies to ensure stable economic growth while keeping inflation in check.
