Retail inflation eases to 5.59% in July

The Consumer Price Index based inflation was 6.26% in June and 6.73% in July 2020

Retail inflation for July cooled to 5.59 per cent after remaining at Reserve Bank of India’s upper target band of 6 per cent for two months, while industrial production witnessed an year-on-year growth of 13.6 per cent, both of which could prompt the central bank to continue with its accommodative and easy monetary policy for longer than expected.

Retail inflation in June was at 6.26 per cent and 6.30 per cent in May.

Government data showed that inflation in the food basket slowed down to 3.96 per cent in July from 5.15 per cent in the previous month, while core inflation recorded a modest dip.

The inflation for food and beverages recorded a substantial cooling in July, led by vegetables, fruits, oils and fats, pulses, sugar and spices.

Read | ‘Transitory’ inflation at tipping point for Indian cos

Earlier in the day, Finance Minister Nirmala Sitharaman said that while India will take measures to contain inflation, growth will be a priority in the current environment.

“We anticipate that the Monetary Policy Committee will embark on policy normalisation once domestic demand strengthens and starts dominating inflationary pressures, in place of supply-side issues,” said Aditi Nayar, Chief Economist at ICRA.

Meanwhile, industrial production output in June rose to 13.6 per cent led by mining sector growth of over 23 per cent. Power generation too increased by 8.3 per cent. Factory output had contracted 16.6 per cent in June 2020.

“The June IIP data at 13.6 per cent is mainly on account of ease in lockdowns and a favorable base. Industrial production data is expected to improve as vaccination picks up,” said Nish Bhatt, CEO, Millwood Kane International.

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