Consumer Price Index-based retail inflation reached 3.21 per cent in August, as opposed to 3.15 per cent in the previous month, showed government data released on Thursday. This is the highest level recorded in the past ten months since October 2018. Retail inflation during August 2018 stood at 3.69 per cent. During August, CPI-based inflation in rural areas was at 2.18 per cent, whereas it was 4.49 per cent in the urban areas.
This is the thirteenth month that retail inflation has stayed under the target of 4 per cent set by the Reserve Bank of India. The central bank factors in CPI-based retail inflation while planning its monetary policy.
Overall inflation in the food basket, measured on the basis of consumer food price index (CFPI), rose to 2.99 per cent in August 2019, in comparison to 2.36 per cent in July 2019.
Prices in food and beverages category increased by 2.96 per cent during the month under review, whereas clothing and footwear prices increased by 1.23 per cent. Housing inflation stood at 4.84 per cent during August 2019. Meanwhile, fuel and light category saw prices decline by 1.70 per cent during August.
Inflation in meat and fish basket was 8.51 per cent, pulses and products 6.94 per cent and vegetables 6.9 per cent.The retail inflation in health was recorded at 7.84 per cent and in recreation and amusement at 5.54 per cent. Personal care and effects segment saw prices rise by 6.38 per cent during August. Inflation rate in the education segment was recorded at 6.10 per cent in August.
India has been battling an economic slowdown, with most macroeconomic parameters showing signs of decline. The GDP growth rate during the April-June quarter fell to a 6-year low of 5 per cent. Over the past few weeks, the government has announced a host of measures to revive the Indian economy. Even RBI has handed over Rs 1.76 lakh crore from its reserves to help the government achieve its fiscal target.
With inflation in check, RBI could focus its monetary policy to rejuvenate the economy. The central bank has reduced the repo rate by 110 basis points over the last four bi-monthly monetary policy meets in a row. The reduction leads to cheaper EMIs on loans granted by banks.
Meanwhile, India's factory output growth, measured by the Index of Industrial Production, grew 4.3 per cent in July 2019 as compared to the level in the month of July 2018, government data showed. Factory output had grown 6.53 per cent in the year-ago period.
The cumulative growth for the period April-July 2019 stood at 3.3 per cent, down from 5.4 per cent growth in the same period a year ago.
The slowdown in industrial output was primarily due to slump in the manufacturing sector, which grew at 4.2 per cent in July 2019 as compared to 7 per cent a year ago. Mining sector grew at 4.9 per cent in July as compared to 3.4 per cent in the corresponding period last year. The power generation sector recorded growth of 4.8 per cent in July 2019, compared to 6.6 per cent in July 2018.