New Delhi, September 12 (IANS) India's annual retail inflation eased by 100 basis points to 5.05 per cent in August, but factory output again dipped to a negative growth of (-)2.4 per cent in July from an expansion of 1.95 per cent in the moth before, official data showed on Monday.
The fall in retail inflation, as per data released by the Central Statistics Office (CSO), was thanks to a rather sharp drop in the annual food inflation -- from 8.35 per cent in July to 5.91 per cent in August.
As far as the factory output is concerned, the drag was due to a negative growth of (-)3.4 per cent in the manufacturing sub-index, which enjoys the maximum weight in the main index, even as the growth rates in mining and electricity indices were also modest.
In May the factory output was up 1.1 per cent, while in April it took a hit of (-)1.4 per cent. In July last year, there was a growth of 4.3 per cent. Cumulatively, the growth during the first four months of this fiscal is at (-)0.2 per cent.
This being the last set of data release on retail inflation and industrial production, ahead of the next bi-monthly monetary policy update due on October 4, expectations have risen sharply on possible interest rate cut.
This, also because the annual retail inflation that was above the upper tolerance level of six per cent in July, has since come down by 100 basis points, even though it is still above the base rate of four per cent.
The government target is four per cent plus or minus two percentage points for the next five years.
Expert views: August retail inflation eases; raises rate cut hopes
MUMBAI (Reuters) - India's annual consumer price inflation eased to 5.05 percent in August, helped by smaller rises in food prices, government data showed on Monday.
Economists surveyed by Reuters had expected annual retail inflation to come in at 5.5 percent last month, compared with 6.07 percent in July.
COMMENTARY
INDRANIL PAN, GROUP ECONOMIST, IDFC BANK LTD, MUMBAI:
"The CPI number is lower than overall estimates driven mostly by food prices. But given the way this number has been jumpy over the last few months and now that the monsoons are not looking as good as it was expected earlier, the RBI may want to wait to till December to get greater evidence on the trajectory of food prices."
"I don't think this number will give thumping confidence to the RBI to cut rates in October. It may rather continue to focus on improving liquidity and transmission of its previous rate cuts in the economy. On the other hand, the fall in the non-durables to the negative territory is a worry especially for revival of growth."
SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, AK CAPITAL, MUMBAI:
"A good CPI show with more than anticipated seasonal fall in vegetable prices followed by pulses prices. Further the fall in core CPI and fuel index have dragged down the overall numbers almost akin to the RBI comfort zone."
"On the contrary the production index went below negative territory as against the expected reading largely resulting from a considerable fall in basic goods followed by volatile capital goods. With not so noticeable recovery in consumer demands and a well accommodated inflation figure from food & fuel, the scope of 25 basis point cut in the October 2016 policy meet seems to be on the cards."
