Retail inflation breaches tolerance level but factory output up

Good news for the economy, bad news for households: prices are racing, while manufacturing is inching up

India’s annual retail inflation shot up beyond the official tolerance level of 6% for July mainly due to higher food prices, including pulses and vegetables, while on the brighter side, factory output rose 2.1% in June, two sets of official data released on Friday showed.

Retail or consumer price index-based inflation rose to this level from 5.77% in June and 3.69% in the like period of last year. The annual retail inflation for rural India was 6.66%.

Importantly, the annual food inflation has been galloping. It was 8.35% for the whole of India, 8.25% in rural areas and 8.80% in the urban conclaves. Among the food items, the annual rise was 27.53% for pulses and 14.06% for vegetables.

In the case of factory output, as revealed by the index of industrial production (IIP), the 2.1% growth in June came against the backdrop of a 1.1% growth in in May this year, and 4.2% rise in the corresponding month of the previous year.

Among the three major sub-indices of the IIP, that for electricity expanded the fastest by 8.3%, followed by 4.7% for mining, while the manufacturing index, that has the maximum weight of over 75%, grew at a relatively lower pace of 0.9%.

The official data on the price situation comes precisely a week after the government fixed an annual inflation target of 4%, plus or minus two percentage points, for the next five years -- which will be the mandate for the Reserve Bank of India to follow.