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Thursday, Oct 24, 2019

India’s retail inflation rises to 3.21% in August

Annual retail inflation in August was slightly higher compared with 3.15% in the previous month, and in line with analysts’ forecasts.

business Updated: Sep 12, 2019 18:42 IST
Reuters
Reuters
New Delhi
India’s retail inflation rate rose to 3.21% in August, driven by higher food prices, the government said on Thursday
India’s retail inflation rate rose to 3.21% in August, driven by higher food prices, the government said on Thursday(HT Photo (Representative Image))
         

India’s retail inflation rate increased to a 10-month high in August but stayed below the central bank’s 4% medium-term target, strengthening expectations that there will be another interest rate cut next month.

Annual retail inflation in August was 3.21%, up from 3.15% in July but below analysts’ forecasts, data from the Ministry of Statistics showed on Thursday.

A Reuters poll had forecast an annual retail inflation rate for August of 3.3%.

Last month’s rate, pushed up by increased health and education costs, was below the central bank’s target for a 13th straight month.

The Reserve Bank of India (RBI) last month lowered its benchmark repo rate for a fourth meeting in a row. It has dropped 110 basis points so far this year to 5.40%.

The central projected inflation to remain at 3.4% to 3.7% during the October-March period.

Economists said the RBI could cut rates further to support consumer demand and private investment, as economic growth slowed to a more than six-year low of 5% in the April-June quarter and inflation remains subdued.

Aditi Nayar, principal economist at ICRA, the Indian arm of Moody’s, said the high frequency data for August 2019 revealed a recovery was not under way, despite a pick-up in industrial growth in July 2019.

“We continue to expect another rate cut in the October 2019 MPC (Monetary Policy Committee) review,” she said.

New Delhi has largely relied on the central bank to support the economy, while resisting pressure to provide a stimulus to boost consumer demand and private investments.

India’s monthly passenger vehicle and car sales recorded their steepest fall ever in August, according to data released by an industry body on Monday, prompting many companies to cut jobs.

India’s unemployment rate rose to 8.2% in August, highest reading since September 2016, compared with 6.3% a year ago and 7.3% in the previous month, estimates from the Centre for Monitoring Indian Economy, a Mumbai-based think-tank, showed.

The next decision from the RBI’s monetary policy committee (MPC) is due on Oct. 4.

Retail food prices, which make up nearly half of India’s inflation basket, increased 2.99% in August year-on-year, compared with a revised 2.36% in July, while prices of services such as education, health and entertainment climbed between 5.54% and 7.84%.

Separately, figures released on Thursday showed industrial output increased 4.3% in July from a year earlier.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)

First Published: Sep 12, 2019 17:53 IST

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