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Retail inflation tumbles to three-month low of 5.59 per cent

The Consumer Price Index (CPI) based inflation was 6.26 per cent in June and 6.73 per cent in July 2020

Our Special Correspondent New Delhi Published 13.08.21, 02:58 AM
Representational image.

Representational image. Shutterstock

Retail inflation tumbled to a three-month low of 5.59 per cent in July as food prices softened and was back within the Reserve Bank’s tolerance level after staying above the upper band of 4 per cent (+/-2) for two straight months.

The Consumer Price Index (CPI) based inflation was 6.26 per cent in June and 6.73 per cent in July 2020.


Inflation in the food basket slowed down to 3.96 per cent in July from 5.15 per cent in the previous month.

“With inflation expected to remain sticky in the 5-6 per cent range over the next three quarters, it’s increasingly difficult to characterise the pressures as purely transitory in nature. A small disruption could push inflation back above the 6 per cent threshold, which implies that some uneasiness will continue about how soon the MPC may embark on policy normalisation,” said Aditi Nayar, chief economist of Icra.

Madan Sabnavis, chief economist of Care Ratings, said: “CPI inflation will range between 5.5-6 per cent for the next couple of months. The base effect will weaken after October. Depending on how the kharif crop fares, CPI inflation will be largely guided.”

Earlier this month, the RBI projected the CPI inflation at 5.7 per cent during 2021-22 — 5.9 per cent in the second quarter, 5.3 per cent in the third, and 5.8 per cent in the fourth quarter of the fiscal, with risks broadly balanced. CPI inflation for the first quarter of 2022-23 is projected at 5.1 per cent.

Industrial output

Industrial production surged 13.6 per cent in June mainly because of a low-base effect and a good performance by manufacturing, mining and power sectors but the output remained below the pre-pandemic levels.

The manufacturing sector, which constitutes 77.63 per cent of the Index of Industrial Production (IIP), grew 13 per cent in June this year, according to the data released by the National Statistical Office (NSO) on Thursday.

Mining sector output rose 23.1 per cent in June while power generation increased by 8.3 per cent.

In June 2021, IIP stood at 122.6 points compared with 107.9 points in the same month last year.

The index was at 129.3 points in June 2019 according to the NSO data. The data showed that industrial production recovered but was still below the pre-pandemic level of June 2019.

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