NEW DELHI: Retail inflation grew 5.05% in August, its slowest pace in five months, rekindling hopes of an interest rate cut by the Reserve Bank of India (RBI) next month.
Factory output, however contracted (-)2.4% in July, an eight-month low, driven down by falling manufacturing sector growth that fell (-) 3.4%, suggesting an uneven recovery in the broader economy.
The consumer price index (CPI)-based retail inflation, which measures changes in shop-end prices, fell from a two-year high of 6.07% in July.
Retail inflation was 3.74% in August last year
Food price inflation fell to 5.91% in August, from 8.35% in the previous month, as fresh supply of seasonal vegetables pushed down prices.
The RBI and the government have set a new retail inflation target of 4% for the next five years, with an upper tolerance level of 6% and lower limit of 2%.
Last month, former RBI governor Raghuram Rajan kept interest rates unchanged in his last monetary policy.
Pulses, a common source of protein for most Indians, grew 22.01 in August, compared to 27.75% in July.
{{/usCountry}}Pulses, a common source of protein for most Indians, grew 22.01 in August, compared to 27.75% in July.
{{/usCountry}}The fall in factory output measured by the Index of Industrial Production (IIP) surprised some analysts.
“Although lead indicators had pointed to a slowdown in industrial growth, the contraction posted by the IIP in July 2016 has come as a surprise, with the performance of manufacturing gloomier than anticipated,” said Aditi Nayar, senior economist at ICRA, a credit rating and research firm.
Consumer durables output, which rose 5.9% in August, could further increase in the coming months, driven by higher salaries for government employees and festive-season buying.