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June retail inflation at new low of 1.54%

Thursday, July 13, 2017

Retail inflation hit a "historically low" level of 1.54% in June on dip in food items like vegetables, pulses and milk products, which may prompt the Reserve Bank to go in for rate cut next month.

"The number of 1.54% is historically low and reflects the firm and ongoing consolidation of macro economic stability," Chief Economic Adviser Arvind Subramanian told reporters.

"The last time we saw such inflation - according to slightly different CPI (IW) - was in 1999 and before that in August 1978," he added. The latest series of Consumer Price Index (CPI) was introduced in January 2012. Inflation in the previous month - May this year - was 2.18%. On the other hand, in June last year, it was 5.77%.

As per the data released by Central Statistics Office, inflation in the food basket as a whole contracted further to 2.12% last month as compared to (-)1.05% in May.

The Reserve Bank, which mainly factors in retail inflation to arrive at its monetary policy, is slated to meet in early August to announce the next bi-monthly policy rate. In its last policy in June, the central bank had kept the key lending rate unchanged citing risk to inflation.

Low manufacturing output pulls down May IIP growth to 1.7%
Industrial output growth slumped to 1.7% in May from 8% a year-ago due to poor performance of mining and manufacturing, and may put pressure on the RBI to cut interest rate in its policy next month. The factory output growth, measured on the Index of Industrial Production (IIP), for April-May period decelerated to 2.3% from 7.3% in the same period last fiscal, as per the data released by the Central Statistics Office.

The data further revealed that output of the capital goods segment, considered as key indicator of investment, shrunk by 3.9% compared to a high growth of 13.9% recorded in May 2016.

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