NEW DELHI: Industrial production declined year-on-year by 8 per cent in August, after having contracted by 10.4 per cent in July. Retail inflation on the other hand rose to 7.34 per cent in September, spurred by higher food prices, according another set of data releases from the Government.
IIP shrank in August mainly on the back of lower manufacturing and mining activity, and lower electricity generation, according to the data released by the Union Ministry of Statistics.
Manufacturing and mining recorded the biggest contractions, falling by 8.6 per cent and 9.8 per cent. Power generation, for its part, shrank by 1.8 per cent during the month. The IIP had contracted by 1.4 per cent in August 2019.
Analysts believe that a combination of weak demand and localised restrictions due to the pandemic has weakened industrial recovery. Said Shilen Shah, India Economist at Capital Economics, “The government continues to disappoint with its fiscal response to the crisis: demand-boosting measures announced on Monday as part of the supplementary fiscal stimulus package amount to just 0.3 per cent of GDP.”
Retail Inflation
Retail inflation as calculated by the Consumer Price Index (CPI), meanwhile, was pushed up to 7.34 per cent in September as compared to 6.69 per cent in August and 3.99 per cent in September 2019, according to data released by the National Sample Survey Office (NSSO), which operates under the Statistics ministry.
Food prices rose sharply at 10.68 per cent compared to 9.05 per cent during the month. The Reserve Bank of India mainly factors in retail inflation while deciding on the key interest rates. Analysts believe that supply disruptions due to Covid-related restrictions were the primary cause of the higher raised prices.
However, they also believe that this trend has peaked and prices are likely to begin coming down going forward since a bumper Kharif crop is expected this season.