Inflation rises marginally; factory output slows

The Reserve Bank of India, which mainly factors in retail inflation to decide its monetary policy, has been tasked by the government to ensure the rate of price rise remains around 4 per cent.

Illustration: Uttam Ghosh/Rediff.com

Rising for the sixth month in a row, retail inflation climbed to 3.18 per cent in June though remaining well within the RBI's comfort zone, leaving scope for a rate cut by the central bank to boost industrial production which has yet to gain traction.

As per figures released by the Central Statistics Office (CSO), factory output growth based on Index of Industrial Production (IIP) slipped to 3.1 per cent in May as against 4.3 per cent in the previous month, mainly on account of subdued performance of mining and manufacturing sectors.

The CSO released another set of data revealing that retail inflation based on Consumer Price Index (CPI) inched up to 3.18 per cent in June, from 3.05 per cent in May, primarily due to firming prices in the food basket.

However, the data revealed that inflation in vegetables and fruits segments eased over the previous month.

Earlier Friday, while replying to a general discussion on the Union Budget in the Rajya Sabha, Finance Minister Nirmala Sitharaman said the government has succeeded in keeping "complete control" over retail inflation.

"Inflation has never been allowed to raise its dirty head to cause inconvenience to the consumers...complete control over inflation is the achievement of this government...," she said.

The Reserve Bank of India, which mainly factors in retail inflation to decide its monetary policy, has been tasked by the government to ensure the rate of price rise remains around 4 per cent.

While reducing the key lending rate (repo) last month by 25 basis points for the third time in a row, the RBI had left the door ajar for more rate cuts.

The CSO data said the overall food inflation based on consumer food price index rose to 2.17 per cent in June as against 1.83 per cent in the previous month.

For the 'pulses and products' category, the rate of price rise was sharply higher at 5.68 per cent against 2.13 per cent, while the inflation in the 'cereals and products' basket rose to 1.31 per cent from 1.21 per cent in May this year.

On the factory output front, the CSO data showed that expansion in the mining sector was merely 3.2 per cent in May, as compared to 5.8 per cent in the year-ago month.

Similarly, growth in the manufacturing sector was also subdued at 2.5 per cent in May, compared to 3.6 per cent in the corresponding month of the last fiscal.

However, the power generation grew at 7.4 per cent in May, as against 4.2 per cent in the same month last year.