India’s retail inflation eased to a 25-month low of 8.10% in Feb
India's annual consumer price inflation eased more than expected to a 25-month low of 8.1% in February, helped by moderating food prices, government data showed on Wednesday.india Updated: Mar 12, 2014 20:45 IST
India’s retail inflation eased to a 25-month low of 8.10% in February from 8.79% in the previous month as fresh seasonal arrivals pushed down vegetable prices.
But, low industrial output that barely crawled at 0.1% in January, from a contraction of 0.2% in the previous month, failed to spread the cheer, official data released Wednesday showed.
The manufacturing sector, which accounts for 80% of India’s total industrial output, fell by 0.7% in January.
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The data demonstrates that the recent rally in equity markets appears to have been driven largely by pre-election expectations rather than buoyed by budding turnaround signs in the real economy.
Retail inflation measured by the consumer price index (CPI) has fallen to its lowest level since January 2012 of 7.65%, but could rise again because of recent unseasonal storms that have battered farms in nine states and threaten to hold up harvesting of the main winter or rabi crop.
Non-food, non-fuel inflation or what is called core retail inflation—a more closely watched index as it captures shop-end prices of industrial goods— also edged down below 8% for the first time in seven months, mirrored a softening of prices.
Sluggish industrial growth and easing inflation, however, are unlikely to prompt the Reserve Bank of India (RBI) to cut lending costs.
“In my view 8 percent is still a very high level of inflation,” said C Rangarajan, chairman of Prime Minister’s Economic Advisory Council.
The RBI has raised lending rate three times in the last six months, to tame inflation by cooling demand. This has raised home loan EMIs.
RBI governor Raghuram Rajan has clearly stated on which side of fence the central bank is on the inflation-versus-growth debate and the central bank’s stated objective to bring down retail inflation to 6% by January 2016 leaves little room for rate cuts.
“Elevated retail inflation is unlikely to set the stage for monetary easing in the immediate term,” said Aditi Nayar, senior economist at rating and research firm ICRA.
A sluggish overall economy, high interest and fuel prices have stunted the growth story across the consumer goods industry with people, deferring planned purchases of goods such as cars, televisions and refrigerators. That consumer durables output fell 8.3% in January mirrors this trend.