Costlier food, fuel push inflation to 3.77 per cent in September

New Delhi: India’s industrial growth slipped to a three-month low of 4.3 per cent in August due to a sharp decline in the mining sector output and poor offtake of capital goods.

Meanwhile, retail inflation rose marginally to 3.77 per cent in September owing to higher fuel and food prices but was short of the Reserve Bank of India’s 4 per cent medium-term target.

The inflation based on consume price index (CPI) had declined to a 10-month low of 3.69 per cent in August. In September 2017, it was at 3.28 per cent.  In categories such as cereals, meat and fish, eggs, milk products, retail inflation showed an upward trend. In fruits, however, the inflation rate moderated in September.

The overall inflation in consumer food basket increased to 0.51 per cent as against 0.29 per cent in August, showed the data.     

In fuel and light category, the rate of price rise was at 8.47 per cent in September.

“The overhang of food disinflation is very visible indeed. Consumer inflation for September surprised at 3.8 per cent, a clear 20 bps below the RBI’s medium-term target for the second straight month. Mind you, this is despite higher fuel prices and depreciation in the rupee,” said Dharmakirti Joshi, chief economist, Crisil Research.

He said with the expectation of overall healthy agricultural production, food inflation should stay contained and weigh down consumer inflation.

“Even if the increased Minimum Support Prices translates into commensurate increase in retail prices, consumer inflation can rise only around 50 basis points. That, in turn, means the policy rate could be on hold during the Monetary Policy Committee’s December review as well,” said Mr Joshi.

The industrial output in August grew 4.3 percent slower than 6.5 percent in July.  The mining sector production contracted by 0.4 per cent in August compared to a growth of 9.3 per cent in the year-ago month.

Similarly the capital goods output growth decelerated to 5 per cent during the month from a 7.3 per cent expansion year ago.  

The manufacturing sector output grew at 4.6 per cent in August compared to 3.8 per cent a year ago.

Power generation grew at the rate of 7.6 per cent in the month as against 8.3 per cent in the year-ago month.