Costlier food items push inflation to 7%

New Delhi, September 12

Retail inflation inched up to 7% in August and industrial production growth, also known as Index of Industrial Production (IIP) decelerated to a four-month low of 2.4% in July, according to two sets of data released by the government on Monday.

Poor show by manufacturing

• Inflation in food basket was 7.62% in August, up from 6.69% in July and 3.11% in August 2021
• The rate of price rise was in excess of 10% in case of vegetables, spices, footwear, and ‘fuel and light’ on annual basis
• The IIP grew by 2.4% in July. The lower performance was due to a poor showing by the manufacturing (3.2%), power (2.3%) and mining sectors (-3.3%)

A poor monsoon led to Consumer Price Index-based inflation rising to 7%, reversing the declining trend of 6.71% in July and 5.3% in August last year. This was mainly due to 7.62% inflation in the food basket, especially in the prices of vegetables and spices. Inflation in the food basket was a much lower 6.69% in July and 3.11% in August 2021.

The Finance Ministry said despite erratic monsoons and negative seasonality in vegetable prices, food inflation in August was still lower than the April peak of the current year.

“Overall, the combination of slightly higher inflation and marginally slower growth is not desired. However, it is unlikely to concern the policymakers or the markets at this stage,” said Nikhil Gupta, chief economist, MOFSL Group.

“The falling crude and commodity prices may offer a respite for the CPI and IIP data going forward. The latest economic data will have a bearing on the RBI’s MPC meet later this month,” said Nish Bhatt of Millwood Kane, an investment consulting firm.

Rural inflation at 7.15% continued to remain above the urban inflation rate of 6.72% in August. Last month, the rural and urban inflation rates were 6.80% and 6.49%, respectively. In August last year, however, rural inflation was 5.28% as against urban inflation rate of 5.32%.

The IIP grew by 2.4% in July, according to another set of data released today. The lower performance was due to the poor show by the manufacturing (3.2%), power (2.3%) and mining sectors (-3.3%). Higher crude, LPG, and commodity prices also dragged the industrial output.