BUSINESS
India’s factory output, measured through the Index of Industrial Production (IIP), witnessed a contraction of (-)0.8 per cent in August.
India’s retail inflation, which is measured by the Consumer Price Index (CPI), rose to a five-month high of 7.41 per cent in September, up from 7.00 per cent in August. Meanwhile, India’s factory output, measured through the Index of Industrial Production (IIP), witnessed a contraction of (-)0.8 per cent in August.
The data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed this is the ninth consecutive time that the CPI print has come above the Reserve Bank of India’s (RBI) upper margin of 6 per cent. The central government has mandated the central bank to maintain inflation at 4 per cent with a margin of 2 per cent on either side for a five-year period ending March 2026.
With inflation remaining above the 6 per cent level, RBI, now, will have to give a report to the central government giving reasons for failure to contain inflation.
In September, RBI Governor Shaktikanta Das said acute imported inflation pressures felt at the beginning of this fiscal year have eased but it still remains elevated across food and energy items. Notably, a recent Reuters poll of economists had forecast the September CPI to spike to 7.30 per cent.
Food inflation, which accounts for nearly half the consumer price index (CPI) basket, soared as prices of essential crops like wheat, rice and pulses - squeezing already stretched household budgets further.
Prices of basic commodities like cereals and vegetables, which make up the largest component in the inflation basket, have increased over the previous two years due to variable rainfall patterns and supply shocks from Russia's invasion of Ukraine.
The RBI takes the CPI data into account when it prepares the bi-monthly monetary policy. On September 30, the Monetary Policy Committee (MPC) hiked the repo rate by 50 basis points to 5.90 per cent. So far, in this financial year, the MPS has raised the key interest rate by 190 bps in a bid to check the raging inflation.
"Another rate hike is certain in the December 2022 MPC (Monetary Policy Committee of RBI) review, after the uncomfortable inflation print of 7.4 per cent for September 2022. The quantum of the next rate hike will be determined by how much the inflation print recedes in October 2022, as well as the strength of the GDP growth for Q2 FY2023," said Aditi Nayar, Chief Economist at ratings firm ICRA.
IIP contracted by 0.8 per cent in August, mainly due to a decline in output of the manufacturing and mining sectors.
Official data showed that the previous low in industrial output growth was a contraction of 3.2 per cent in February 2021.
Factory output, measured in terms of the Index of Industrial Production (IIP), had expanded by 13 per cent in August 2021. The IIP grew by 2.2 per cent in July this year.
The manufacturing sector shrank by 0.7 per cent in August 2022 compared to the 11.1 per cent growth recorded in the year-ago period, as per the data released by the Statistics and Programme Implementation Ministry.
The power sector showed a growth of 1.4 per cent against a 16 per cent rise a year ago. The mining sector witnessed a contraction of 3.9 per cent in August 2022, whereas there was a growth of 23.3 per cent in the year-ago period.
During April-August this year, IIP rose 7.7 per cent against 29 per cent growth in the same period a year ago.
Capital goods output, which is a barometer of investments, rose five per cent in August 2022 compared to 20 per cent growth in the year-ago month.
The consumer durables segment declined 2.5 per cent from 11.1 per cent growth a year ago.
The primary goods segment, which accounts for nearly 34 per cent of the index, expanded 1.7 per cent in August compared to 16.9 per cent growth in the year-ago period.
The ministry said the growth rates over the corresponding period of the previous year are to be interpreted, considering the unusual circumstances on account of the COVID-19 pandemic since March 2020.
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