India’s retail inflation remains high at 6.26 percent in June 2021



Retail Inflation India: India’s retail inflation stood at 6.26 percent in June 2021, which is slightly down from 6.30 percent in May but still well above the Reserve Bank of India’s (RBI) threshold of 6 percent. This is as per the data issued by the Ministry of Statistics and Programme Implementation on July 12, 2021. 

The centre had directed the RBI to maintain retail inflation at 4 percent with a 2 percent margin on either sides till March 2026. However, the retail inflation measured by the Consumer Price Index (CPI) had jumped to 6.3 percent in May, the highest in the last six months. 

This is the second time in six months that the Consumer Price Index (CPI) data has crossed the RBI’s tolerance margin of 6 percent. 

Food Inflation rises

• The Consumer Food Price Index (CFPI) went up slightly in June 2021 to reach 5.15 percent in comparison to 5.01 percent in May 2021. The CFPI is also called food inflation.

• The marginal increase in food inflation is due to a sharp rise in prices of oils and fats, which recorded a 34.7 percent jump in June 2021 over June 2020.

• The price of non-alcoholic beverages also rose by 14.7 percent. 

• The prices of pulses too rose by 10 percent in June 2021 over June 2020. 

Factory Output reports growth

• The factory output or Index of Industrial Production reported a growth of 29.3 percent in May in comparison to a decline of 33.4 percent in May 2020. 

• The rise in industrial production in May can be attributed to the low-base effect and good performance by the manufacturing, mining and power sectors. 

• The manufacturing sector, which constitutes 77.63 percent of the Index of Industrial Production (IIP), grew by 34.5 percent in May 2021. 

• The mining sector output increased by 23.3 percent in May. 

• Power generation also increased 7.5 percent during the same month.

Index of Industrial Production

• The Index of Industrial Production stood at 116.6 points in May 2021, in comparison to 90.2 points in May 2020. The Index stood at 135.4 points in May 2019. 

• Hence, NSO data suggests that while industrial production has recovered but it is still below the pre-pandemic level in May 2019.

• Industrial production had plunged 18.7 percent in March last year following the COVID-19 outbreak and remained in the negative zone till August 2020.

• Consumer durables manufacturing grew 98.2 percent in May 2021 under review compared to a 70.3 cent decline in May 2020. 

• The consumer non-durable goods production grew 0.8 percent in May 2021 in comparison to a contraction of 9.7 percent in May 2020. 

Price rise in Oils, Fruits & Vegetables 

The inflation on annual basis in the ‘oils and fats’ segment stood at 34.78 percent in June, as per the data released by the National Statistical Office (NSO) on June CPI.

The Government has reduced duty and has lifted the restriction on imports of certain edible oils for the next few months. As a result of this, the prices of edible oils have softened in both wholesale and retail markets since mid of June. The prices are expected to remain at the current level over the next few months.

The rate of price rise in fruits basket was 11.82 percent, while it contracted by -0.7 percent in vegetables.

Fuel Price Rise

The rate of inflation in the ‘fuel and light’ segment was 12.68 percent.

Background

The Reserve Bank of India has been mandated by the centre to maintain retail inflation at 4 percent with a margin of 2 percent on either side. The central bank factors in the CPI inflation while arriving at its bi-monetary policy.



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