Hindustan Times ST (Jaipur)

Retail inflation at 5mth high; factory output contracts

- Agencies feedback@livemint.com

RATE RATTLES Worries about a possible rise in food prices had led RBI to keep its key lending rate on hold last week

Higher fuel costs drove up India’s headline inflation to its highest level in five months in March, data released on Wednesday showed, vindicatin­g a central bank decision last week to keep its policy rate on hold amid concern about prices.

Consumer prices rose by an annual 3.81% last month, their fastest pace since October 2016, compared with February’s 3.65% increase, the Ministry of Statistics data showed.

The rise, however, was slower than the 3.98% forecast by economists in a Reuters’ poll.

Retail fuel inflation accelerate­d to 5.56% in March from 3.90% a month ago. Food prices rose 1.93% on the year, slower than a 2.01% annual increase a month earlier.

Worries about a possible flare-up in food prices, should India experience below-average monsoon rains this year, forced the Reserve Bank of India (RBI) to keep its key lending rate on hold for a third straight meeting last week.

But more surprising­ly in a subtle shift to a tightening bias, the central bank raised the reverse repo rate — what banks get for deposits at the RBI — by 25 basis points, to help mop up excess liquidity in the banking system.

“The CPI reading is a positive surprise, largely driven by lower than expected inflation for food and beverages. Food inflation has remained steady for the past three months, brushing off concerns regarding the unwinding of the base effect and seasonal upturn in prices of perishable­s,” said Aditi Nayar, chief economist, ICRA.

India’s factory output, meanwhile, contracted by (-)1.2% in February, official data showed on Wednesday.

The factory output, as per the Index of Industrial Production (IIP), had decelerate­d by (-)1.2% during February from a rise of 3.2% reported for January 2017.

The factory output had expanded by 1.9% in the correspond­ing month of the previous year.

According to the IIP data released by the Central Statistics Office (CSO), the contractio­n was mainly on account of a 2% decline in manufactur­ing output, which has the maximum weight in the overall index.

However, the output of other two major sub-indices — mining and electricit­y — expanded during the month under review.

The mining output rose by 3.3% and that for electricit­y generation inched up by 0.3%.

The cumulative growth of the country’s factory output has inched higher by 0.4% in the 11 months of the last fiscal -- Aprilto-February — period.


 ?? HT/FILE ?? Food prices rose 1.93% in March, slower than a 2.01% annual increase a month earlier
HT/FILE Food prices rose 1.93% in March, slower than a 2.01% annual increase a month earlier

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