India's retail inflation snapped a four-month decline and grew 4.81% in June as food prices surged, showed government data on Wednesday. This means a cut in interest rates will be unlikely anytime soon. India's CPI inflation was 4.31% in May.
Uneven monsoon rains have damaged crops of some perishable foods and hindered the movement of goods, resulting in shortages of basic ingredients for cooking, such as tomatoes, chillies and onions.
Food inflation, which accounts for nearly half of the overall consumer price basket, rose to 4.49% against a revised 2.96% in May. The food basket accounts for nearly half of the CPI.
Vegetable prices increased 12% on a month-on-month basis in June.
Inflation based on the Consumer Price Index (CPI) stood at 4.31 per per (revised upward from 4.25%) in May and 7% in June 2022.
The inflation, however, remains within the RBI's comfort level of below 6%. The previous high CPI was in March at 5.66%.
The government has tasked the Reserve Bank of India to ensure retail inflation remains at 4% with a margin of 2% on either side. The central bank mainly factors in the CPI to arrive at its bi-monthly monetary policy decision. The next policy review is scheduled early next month.
Last month, the Reserve Bank kept policy rates unchanged at 6.5% and projected retail inflation for the current fiscal to average at 5.1%, with June quarter inflation pegged at 4.6%.
India's industrial production rose to 5.2% in May from 4.5% in April 2023, mainly due to good performance by the manufacturing and mining sectors, according to the official data released on Wednesday.
The factory output growth measured in terms of the Index of Industrial Production (IIP) stood at 19.7% in May 2022, mainly due to a lower base effect.
''The growth rates over corresponding period of previous year are to be interpreted, considering the unusual circumstances on account of COVID 19 pandemic since March 2020,'' an official statement explained.
As per the IIP data released by the National Statistical Office (NSO), the manufacturing sector's output grew 5.7% in May 2023 against a 20.7% expansion a year ago.
Power generation rose 0.9% in May 2023 compared to a growth of 23.5% a year ago.
Mining output rose by 6.4% during the month under review against an 11.2% expansion in the year-ago period.
As per use-based classification, the capital goods segment grew 8.2% in May this year compared to 53.3% a year ago.
Consumer durables output during the month rose 1.1% against a 59.1% growth in the year-ago period.
Consumer non-durable goods output increased by 7.6% compared to a growth of 1.4% a year earlier.
Infrastructure/construction goods posted a growth of 14% over an 18.4% expansion in the same period a year ago.
The data also showed that the output of primary goods logged 3.5% growth in the month against 17.8% in the year-ago period.
The intermediate goods output in May rose 1.6% compared to a 17.5% growth during the corresponding month last year.
During the April-May period of fiscal 2023-24, the growth in IIP works out to be 4.8%, down from 12.9% in the corresponding period a year ago.
Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd, said: "A less supportive base and the onset of the spike in vegetable prices pushed up the CPI inflation to a higher than anticipated 4.8% in June 2023, arresting the welcome cooling seen in the previous four months. The IIP growth rose to a three-month high of 5.2% in May 2023, in line with our expectations, led by all the use-based industries except consumer non-durables and infra/construction goods."