Retail inflation at historic low in June, IIP slumps in May
Annapurna Singh, DH News Service, New Delhi, Jul 13 2017, 2:26 IST
With the inflation in June dropping to record lows, the Reserve Bank may announce a rate cut in the next bi-monthly policy rate. PTI photo for representation.
Country's retail inflation in June at 1.54% in June hit its lowest in 18 years on a sustained dip in vegetable and food prices.
A government data showed, inflation in food declined 2.12% in June. In vegetable segment the decline was even more higher to 16.53% and pulses closed to 22%.
The industrial production data also released simultaneously, however, showed the factory output slumped at 1.7% in May, the first time in the past three months. The fall in industry output was a cumulative result of poor performance by mining and manufacturing sectors.
While mining in May fell 0.9% compared with last year, manufacturing activity slowed to 1.2% in the same period compared with a growth in the sector at 8.6% in May last year.
The two important macro-economic numbers indicated the Reserve Bank of India may cut policy interest rates in the next bi-monthly policy review slated on August two.
Industry demanded a rate cut citing the combination of lowered inflation and a slump in factory output. Chief Economic Advisor Arvind Subramanian too expressed the same sentiment and said, “clearly the low inflation number as well as the latest IIP data is something that I am sure all policy makers will reflect upon very very carefully”.
Industry body Ficci's Secretary General Didar Singh said, “the subdued growth in manufacturing is worrying as some of the major sectors like capital goods, automobile and textiles have shown de-growth. This further underlines the need for major reforms to improve the investment climate further.
“In view of the fall in consumer durable growth, reducing interest rates would help in stimulating demand and also reviving investments,” he said.
The inflation number is now below the RBI'S forecast for the current financial year. Last month, the RBI had lowered the headline inflation expectation for 2017-18 to 2%-3.5% for April-September, down from 4.5% earlier.
A government data showed, inflation in food declined 2.12% in June. In vegetable segment the decline was even more higher to 16.53% and pulses closed to 22%.
The industrial production data also released simultaneously, however, showed the factory output slumped at 1.7% in May, the first time in the past three months. The fall in industry output was a cumulative result of poor performance by mining and manufacturing sectors.
While mining in May fell 0.9% compared with last year, manufacturing activity slowed to 1.2% in the same period compared with a growth in the sector at 8.6% in May last year.
The two important macro-economic numbers indicated the Reserve Bank of India may cut policy interest rates in the next bi-monthly policy review slated on August two.
Industry demanded a rate cut citing the combination of lowered inflation and a slump in factory output. Chief Economic Advisor Arvind Subramanian too expressed the same sentiment and said, “clearly the low inflation number as well as the latest IIP data is something that I am sure all policy makers will reflect upon very very carefully”.
Industry body Ficci's Secretary General Didar Singh said, “the subdued growth in manufacturing is worrying as some of the major sectors like capital goods, automobile and textiles have shown de-growth. This further underlines the need for major reforms to improve the investment climate further.
“In view of the fall in consumer durable growth, reducing interest rates would help in stimulating demand and also reviving investments,” he said.
The inflation number is now below the RBI'S forecast for the current financial year. Last month, the RBI had lowered the headline inflation expectation for 2017-18 to 2%-3.5% for April-September, down from 4.5% earlier.
