May retail inflation up at 4-month high of 4.87%

Retail inflation jumped to 4-month high of 4.87 per cent in May on costlier food items such as fruits, vegetables and cereals coupled with high fuel rates.

Based on the consumer price index (CPI), the retail inflation was at 4.58 per cent in April. In May 2017, however, it was at a low of 2.18 per cent. The previous high in retail inflation was in January this year at 5.7 per cent.

Meanwhile, industrial pr­oduction expanded by 4.9 per cent in April on impro­ved performance by manufacturing and mining sectors as also a robust offtake of capital goods. The industrial growth, based on the index of industrial production (IIP), was 3.2 per cent in April last year.

The overall consumer fo­od price index shot up to 3.10 per cent in May, from 2.80 per cent in April, as per the central statistics office (CSO). Fruit prices grew at a faster pace of 12.33 per cent in May against 9.65 per cent in April, while vegetables were costlier by 8.04 per cent (from 7.29 per cent month ago).

Cereals and products saw 2.78 per cent inflation in May as against 2.56 per cent in April, while oil and fats turned dearer at 2.46 per cent from 2.11 per cent in April. For the fuel and light category, the inflation last month stood at 5.8 per cent, up from 5.24 per cent.

However, for protein rich items such as meat and fish, eggs as well as milk and products, the inflation in May slowed compared with a month earlier.

The CPI-based retail inflation is a key input for the Reserve Bank of India (RBI) to decide on its key rate. In its latest policy review earlier this month, RBI raised the repo rate – at which it lends to banks – by 0.25 per cent to 6.25 per cent, the first hike in more than four years due to growing concerns about inflation stoked by rising global crude oil prices as well as domestic price increases.

The banking regulator has revised the first half inflation projection to 4.8-4.9 per cent in FY19, and 4.7 per cent in H2 – including the HRA impact of central government employees.

RBI had said the decision of the monetary policy committee to hike the rate was consistent with the neutral stance and in consonance with the objective of achieving the medium-term target for CPI inflation of 4 per cent within a band of (+/-) 2 per cent, while supporting growth.

The IIP for March this year has been revised upwards to 4.6 per cent from 4.4 per cent estimated earlier. As per the data released by CSO, the manufacturing sector that accounts for over 77 per cent weight of the index, recorded a growth of 5.2 per cent in April this year, up from 2.9 per cent a year ago. Similarly, the mining output grew by 5.1 per cent, compared with 3 per cent in the year ago period.

As per the ‘use based’ classification, capital goods out, a barometer of investment, expanded by 13 per cent in April this year against a decline of 4.8 per cent in the year-ago month. Consumer durable as well as consumer non-durable segments too posted higher growth on yearly basis. In terms of industries, 16 out of 23 groups in the manufacturing sector have shown positive growth in April this year on yearly basis.