India’s retail inflation drops to 4.59 % in December

Marco Green
January 13, 2021

This is the lowest point in retail inflation since March past year, when it was pegged at 5.84 per cent, marking a return to the comfort range of 2-6 per cent prescribed by the Reserve Bank of India for the first time in nine months.

The lowest consumer price inflation (CPI) print in 14 months was driven by an sharp slowdown in food price inflation, which eased to 3.4% in December, from the preceding month's 9.5%.

Another set of data released by the Centre showed that the country's industrial production contracted by 1.9% in November.

The November data for IIP showed that the manufacturing sector witnessed contraction of 1.7% as compared to growth of 3% a year ago, while the mining sector saw contraction of 7.3% in November 2020 as against growth of 1.9% in November 2019. Cumulatively, factory output for April-October a year ago has contracted by 15.5 per cent, as against 0.3 per cent growth in the same period in 2019. Mining output contracted 7.3% in the month, while manufacturing declined 1.7%, indicating an unwinding of inventory build-ups with the quenching of pent-up and festive demand. The NSO also revised upwards the index for the preceding three months by incorporating more production data.

The output of capital goods, which is a barometer of investment, fell by 7.1% in November 2020 as against a contraction of 8.9% earlier. The IIP had grown by 2.1% in November 2019.

Sugar and confectionary prices increased only 0,53 per cent in December, whereas spices got costlier by 10.29 per cent. Inflation in non-alcoholic beverages was recorded at 11.86 per cent and that in prepared meals, snacks, sweets, etc. touched 4.81 per cent.

"The November data once again shows that the uptick witnessed in the month of September and October was due to a combination of festive and pent-up demand and the recovery is still shallow and fragile", said Sunil Kumar Sinha, principal economist at India Ratings & Research.

Retail inflation, calculated on the basis of Consumer Price Index (CPI), declined to 4.59 per cent in December past year as vegetable prices plunged sharply. Electricity generation was the only sector in the positive, recording a growth of 3.5 per cent during November.

Cereal and other products saw marginal rise in price during December past year at 0.98 per cent. Inflation in meat and fish, and egg segments stood at 15.21 per cent and 16.08 per cent, respectively. "Additionally, the hardening prices of crude oil, and its partial transmission into domestic retail prices, remain a concern", she added.

Other reports by Click Lancashire

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