INDUSTRIAL OUTPUT CONTRACTS; RETAIL INFLATION RISES

Industrial production in February declined for the second month in a row at a faster rate of 3.6 per cent, compared with 0.9 per cent in the previous month. This is the sharpest contraction in factory output witnessed over the past six months. The retail price inflation rate rose to a fourmonth high of 5.52 per cent in March due to upward movement in core as well as food rates, barring vegetables and cereals. The consumer price index (Cpi)-based inflation rate had stood at 5.03 per cent in February and 5.84 per cent in March 2020.

Retail price inflation rose to a four-month high of 5.52 per cent in March 2021 due to upward movement in core sector as well as food rates, barring vegetables and cereals.

This may prevent the central bank’s monetary policy committee (MPC) to cut policy rates unless growth really takes a hit due to regional lockdowns in 2021-22, say experts.

The consumer price index (Cpi)-based inflation rate had stood at 5.03 per cent in February 2021 and 5.84 per cent in March 2020. The average inflation rate in 2020-21 rose to 6.18 per cent compared to 4.76 per cent in the previous year. It could fall to around five per cent in the current fiscal year, according to MPC estimates.

While food inflation rate rose to 4.94 per cent in March from 3.87 per cent in the previous month, prices of veggies and cereals declined. While prices of vegetables fell to 4.83 per cent in March compared to 6.27 per cent in the previous month, those of cereals moved down by 0.69 per cent from 0.35 per cent. Fruits saw inflation rate rising to 7.86 per cent in March from 6.28 per cent in the previous month.

On the other hand, the inflation rate in non-vegetarian items remained elevated even as it declined in eggs. Meat and fish saw the rate rising to 15.09 per cent in March from 11.34 per cent last month. On the other hand, eggs saw the rate decline to 10.6 per cent from 11.13 per cent.

Aditi Nayar, principal economist at ICRA, said, “Despite a month-on-month decline in food prices, driven by vegetables, eggs, spices, cereals and sugar, the inflation for food and beverages hardened in March on account of the base effect. A reversal of the base effect as well as decline in prices of vegetables, such as onions, is expected to dampen the food inflation to around 2-2.5 per cent in April.”

Fuel and light inflation rate was up at 4.5 per cent from 3.53 per cent.

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