Monday’s official data showed that this August, India’s annual retail inflation eased to 5.05 percent by a 100 point basis. Meanwhile the factory output once again performed poorly with decreasing even further in July to a (-) 2.94 percent negative growth, this is with respect to the previous month’s expansion of 1.95 percent.

The data as gathered by the Central Statistics Office (CSO) lead to the conclusion that the fall in retail inflammation was due to the annual food inflation’s sharp drop from July’s 8.35 percent to 5.91 percent in August.

Richa Gupta, a Senior Economist at Deloitte India, states, “Growth numbers on the industrial production have disappointed by showing a contraction albeit on the back of the volatile capital goods numbers. The manufacturing sector has contracted by 3.4 percent in July essentially on the back of the volatile cable, rubber insulated category. However, data shows that electricity and mining growth were also weak during the month.”

It has also been observed that the basic goods as well as intermediate goods production continued to expand while the consumer durables did well thereby registering an expansion of 5.9 percent. Further, as observed by Gupta, there could also be some divergence in performance under the new series. She pointed out, stating, that “as far as the factory output is concerned, the drag was due to a negative growth of (-)3.4 per cent in the manufacturing sub-index, which enjoys the maximum weight in the main index, even as the growth rates in mining and electricity indices were also modest.”

Rishi Shah who is a prominent economist at Deloitte India observed that the Retail inflation has fallen noticeably recently. He says that a fall in inflation was expected, however, the extent has been more than anticipated as vegetable prices have shown a sharp correction. While focusing on the prices of the pulses, Shah said that, “prices of pulses have also come down showing that the supply side measures undertaken by the authorities are having a dampening effect.”

During May, the factory output witnessed a push of 1.1 percent but in April was pulled down by (-) 1.4 percent. Last year in July, a growth of 4.3 percent was present, comparatively the fiscal of this year’s first four months is (-) 0.2 percent.

This will be the last report available on retail inflation and industrial production have led to hopes of cuts in interest rate, before the impending update of the bi-monthly monetary policy on October 4th.

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