NEW DELHI: Inflation, as measured by the Consumer Price Index (CPI), has continued its slow march upwards, hitting 5 per cent in June. According to analysts, most of the acceleration in price rise has been driven by costlier fuel, even though food prices have begun easing.
In June last year, retail inflation had come in at just 1.46 per cent. Since then, retail inflation has largely tracked the upward rise in crude oil prices, rising steadily to 5.21 per cent in December 2017, before easing a bit to 4.28 per cent in March this year. During that period, Brent crude prices rose from $47.74 per barrel (July 12, 2017), to $66.57 per barrel at the end of March 2018.
However, both crude prices and retail inflation have found their second wind during the new financial year. Over the first three months of the current fiscal, retail inflation has risen from 4.28 per cent in March to 5 per cent in June. Crude prices meanwhile, had crossed the $80 per barrel threshold by the end of June.
The rise in retail inflation is likely to rule out any rate cut from the Reserve Bank’s Monetary Policy Committee during their next meeting, adding further constraints on credit disbursal. The RBI had hiked rates for the first time in nearly four years this June citing crude oil and inflation risks.
Data released by the Central Statistics Office (CSO) shows that food-related inflation had slowed to 2.91 per cent in June, compared to 3.1 per cent in May. However, inflation in the fuel and light category has gone up to 7.14 per cent from 5.8 per cent in May.
IIP at 7-month low
Industrial production growth measured by the Index of Industrial Production also slipped to a seven-month low of 3.2 per cent in May mainly due to sluggish performance of manufacturing and power sectors coupled with poor offtake of fast moving consumer goods.
The CSO has also revised IIP growth down to 4.8 per cent in April from previous estimates of 4.9 per cent