Retail inflation rises to over 5 percent while factory output decreases: NSO data

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Retail inflation rose to a four-month high of 5.52 percent in March, owing to higher fuel and food prices, while factory output lessened to a six-month low of 3.6 percent in February, due to poor performances of manufacturing and mining sectors, said the National Statistical Office on April 12, 2021.

According to Firstpost, the Consumer Price Index (CPI) based retail inflation was 5.03 percent in February. The rate of price rise in the food basket accelerated to 4.94 percent in March as opposed to 3.87 percent in the preceding month. Similarly, fuel and light inflation was 4.50 percent during the month vis-a-vis 3.53 per cent in February.

Earlier, the Reserve Bank of India (RBI) estimated the retail inflation at 5 percent in the January-March quarter of 2020-21 and at 5.2 percent in the first two quarters of the current fiscal year.

After crossing the upper tolerance threshold of 6 percent from June to November 2020, the CPI inflation fell in December and eased further to 4.1 percent in January 2021 following sharp correction in vegetable prices and softening of cereal prices. However, it rebounded to 5 percent in February, driven primarily by base effects.

The RBI mainly factors in the retail inflation while arriving at its monetary policy and has been asked to keep the CPI inflation at 4 percent with a margin of 2 percent on either side. The central bank retained the key lending rate (repo) in its last monetary policy citing inflationary concerns.

However, Care Ratings Chief Economist Madan Sabnavis told The Telegraph, “With renewed pandemic restrictions across India, elevated global prices across commodities and higher transportation and logistics cost, price pressures are likely to prevail in coming months for most segments. At the same time, the headline inflation reading could benefit from the higher base of a year ago.”

Meanwhile, the manufacturing sector that constitutes 77.63 percent of the Index of Industrial Production (IIP) declined 3.7 percent in February 2021. Similarly, the mining sector output declined 5.5 per cent in the same period. However, power generation grew marginally by 0.1 percent.

Speaking to the newspaper, ICRA Chief Economist Aditi Nayar said this marginal change between September 2020 and February 2021 shows that the recovery in industrial volumes lacks conviction.