Cooling food prices pull inflation down to five-month low

 Industrial output stays robust, tops pre-Covid level

- ARUP ROYCHOUDHURY & INDIVJAL DHASMANA

India's headline retail inflation for July came in at its lowest in five months, helped by easing global commodity prices and lower food prices domestically. Still, at 6.71 per cent, it was above the Monetary Policy Committee's (MPC's) medium-term target, thus justifying the recent monetary tightening by the Reserve Bank of India (RBI).

On the industrial production front, official data showed a normalisbase effecting According to the Index of Industrial Production (IIP), growth in India's factory output came in at 12.3 per cent year-on-year (YoY) in June, against a 12-month high of 19.6 per cent in the previous month

Barring capital goods, the industrial output was, in fact, more robust in June than May, when compared with the pre-Covid period of 2019-20.

According to the data released by the National Statistical Office (NSO) on Friday, the Consumer Price Index-based YoY inflation in July was noticeably lower than 7.01 per cent in June. The Consumer Food Price Index (CFPI) was at 6.75 per cent in July, down sharply from 7.75 per cent in June. "The slowdown in consumer inflation for the third consecutive month suggests that inflationary pressures, though elevated, are on a downward trend. Encouragingly, households' inflation expectations also improved in July, reflecting the effectiveness of the RBI's and the government's efforts to tame inflation," said Rajani Sinha, chief economist, CARE Ratings.