Favaourable base effect in various sub-groups dragged retail inflation based on Consumer Price Index to a 59-month low of 3.5 per cent. Food inflation dropped to a 13-month low of 5.1 per cent in July.
Separately, the growth in the index of industrial production (IIP) declined to a three-month low of 4.2 per cent in June from the upward-revised figure of 6.2 per cent in the preceding month.
Core inflation (headline minus volatile inflation of food and fuel) rose to 3.4 per cent from 3.1 per cent, signalling some improvement in demand. Experts do not see expedition of rate cuts as inflationary expectations are still high.
“During the month of July 2024 there is a decline in inflation for all the groups. Significant decline is in the vegetables, fruits and spices sub-group,” a statement issued by National Statistical Office (NSO) said on Monday. Food and beverages inflation eased after maintaining 7 per cent mark in each of the last eight months.
Aditi Nayar, Chief Economist with ICRA, said while eight of the 12 sub-segments in this group witnessed a lower YoY inflation in July vis-à-vis June, the chief driver of the downtrend was vegetable inflation which declined quite sharply to 6.8 per cent from 29.3 per cent in the previous month, led by the favourable base. “In MoM terms, however, vegetable prices shot up by 14.1 per cent in July, after having risen at a similar pace in June,” she said.
Swati Arora, Economist with HDFC Bank ,said while on a sequential basis, food momentum continued to remain high largely due to high vegetable and pulses prices, there was an uptick in core inflation reflecting higher telecom tariffs and gold prices. “We expect core inflation to rise above 4 per cent from September onwards as support from favourable base wanes and also due to an improvement in demand conditions,” she said.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, “We continue to maintain that RBI will be on a status quo mode on rates for the October policy with likely shift in stance then. Scope for a shallow rate easing cycle could open from December but much will be data dependent both in India and the US.”
Industrial Growth
Another set of data released by NSO showed that industrial production growth, measured on the basis of Index of Industrial Production (IIP) slowed to a five-month low of 4.2 per cent in June against 6.2 per cent in May mainly due to poor performance of the manufacturing sector, though power and mining sectors continue to perform well, as per official data released on Monday.
Per the data, the mining output growth accelerated to 10.3 per cent in June against a 7.6 per cent expansion in the year-ago month. The manufacturing sector’s growth decelerated to 2.6 per cent in June compared to 3.5 per cent a year ago.