NEW DELHI: Two sets of data released on Thursday brought some cheer to the economy as retail inflation cooled to a one-year low of 5.7% in December from 5.8% in November while factory output grew sharply to a five-month high of 7.1% against a contraction of 4.2% in October.
The moderation in Consumer Price Index-based inflation was helped by contraction in food prices, while the Index of Industrial Production (IIP) was on the back of healthy growth in manufacturing.
This is the second straight month that retail inflation has fallen below the Reserve Bank of India’s upper tolerance limit of 6%. Retail inflation was 5.88% in November 2022 and the previous low was 5.66% in December 2021.
The fall in retail inflation can be attributed to the decline in food inflation to 4.19% from 4.67%. In the food basket, vegetable prices fell sharply with the index slipping 12.67% in December compared to November. On a year-on-year basis, vegetable prices shrank 15%.
Other items which also recorded a decrease in prices include meat and fish, oil and fats, fruits, and sugar and confectionery. However, high cereal prices and an elevated core inflation (non- food, non-oil) remain a cause of worry.
Notably, inflation has eased globally too with the US number decelerating to 6.5% in December. According to the US Bureau of Labor Statistics, on a monthly basis, the cost of living fell 0.1% thanks to a drop in gasoline prices.
The rise in IIP was mostly due to base effect, besides strong sequential growth across major sectors.