Retail Inflation Falls To 2.18% This May, Lowest Since January 2012

Ministry of Statistics & Programme Implementation (MoSPI) will be announcing retail inflation or Consumer Price Index (CPI), and factory output or Index of Industrial Production (IIP) data on Monday.

India's retail inflation rate fell to 2.18 percent in May, lowest since 2012, mainly due to a fall in food prices.

The nation's IIP accelerated to 3.1% in April 2017.The mining sector grew 4.2% in April on a yearly basis, as against a growth of 6.7% in the same month of the previous year. While in the month of March, it stood at 3.81%, rose from 3.65% in February. A Reuters poll had predicted May's figure would be around 2.60%.

India's annual Consumer Price Index (CPI) inflation for May fell to 2.18% from 2.99% in April, while the annual Index of Industrial Production (IIP) for April rose 3.1% from 2.7% in March.

With headline inflation undershooting the Reserve Bank of India's (RBI) mid-term target of 4 percent for the past seven months, pressure has mounted on the central bank to resume interest rate cuts to juice up economic growth that has hit the lowest level in more than two years.

"CPI Inflation will stay low till July, greater chance of it falling in May to a new low of 2.58%", D.K. Joshi, chief economist of Crisil had said before the release of this data.

Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, remained flat.

At its policy review last week, the RBI left key interest rates unchanged, but lowered inflation projections and delivered a slightly less hawkish policy statement.

Prices of vegetables declined by 13.44 percent and that of pulses and products by 19.45 percent.

Sunil Kumar Sinha, Principal Economist, India Ratings & Research, said though inflation is going to remain low and well within the comfort zone of RBI, probability of large policy rate cut is low. Electricity generation in the country, according to the government data grew by by 5.4% in April, as against a 14.4% growth in April 2016.

  • Zachary Reyes