India’s retail inflation fell to a five-month low of 4.35% in September on the back of a sharp fall in food price inflation, while industrial production growth It rose sharply to 11.9% in August, mainly driven by the statistical impact of the lower base – a 7.1% contraction was recorded in August 2020.
Economists caution against reading too much into these encouraging official data prints so far, lurking adversities on both fronts.
Food inflation, based on the Consumer Food Price Index (CFPI), declined to just 0.68% in September, from a seven-month low of 3.1 percent in August. While vegetables recorded negative inflation of 22.5%, the price increase in oils and fats remained in the range of 34.2% and 7% to 8.75% for major protein sources such as pulses, eggs and meat.
However, core inflation that does not include food and fuel price trends remained at 5.8% for the third month in a row, and economists said the reduction in inflation could be transient, with rising energy, metals and logistics costs. major risk factors.
“Consumer price inflation for October and November is tentatively expected to remain below 4%, before resuming in the remainder of this fiscal year,” said Aditi Nair, chief economist, ICRA. Economist Aditi Nair said, barring food and housing, the emphasis was on most sectors. A flat or high inflation reading was recorded in September.
food price trajectory
Sreejith Balasubramaniam, economist at IDFC Asset Management Company, said the trajectory of food prices will remain significant as prices of some vegetables have changed direction and have risen sequentially in October.
“Commodity prices, especially crude oil, and their partially offset effect on inflation and consumption demand at a time when aggregate demand in the economy is still below pre-pandemic levels,” he said.
Manufacturing grew at 9.7%, electricity 16% and mining output 23.6% in August, but each of these sectors registered negative growth in 2020. Overall, however, the Index of Industrial Production (IIP) actually fell in August. July, noted Ms. Nair.
“While the recovery was limited to primary goods and consumer non-durables, all other categories showed a deceleration in growth in August relative to July,” she said, adding that the IIP was 3.9% higher than pre-pandemic levels . He underlined that consumer durables production remained below pre-COVID levels, ‘highlighting the enduring impact of the pandemic on big-ticket demand.
The ICRA economist said that excessive rains in September could dent mining, power and construction activities and non-availability of semiconductors could lead to 3-5% growth in IIP in September.
Rajni Sinha, Chief Economist, Knight Frank India, said, “The growth in IIP in August is mainly due to the base effect.
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