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Current Affairs

Retail inflation falls

Date: 13 March 2020 Tags: Reports & Indices

Issue

Retail inflation based on the Consumer Price Index slowed to 6.58% in February, while the industrial production growth as measured in the Index of Industrial Production (IIP) quickened to 2% in January, according to official data.

 

Background

Retail inflation means the increase in prices of certain products or commodities compared to a base price. In India, retail inflation is linked to Consumer Price Index(CPI) which is managed by Ministry of Statistics and Programme implementation.

 

Details

  • Retail inflation, which was 7.59% in January 2020 and 2.57% in February 2019, slowed mainly due to easing food prices. Inflation in the food basket was 10.81% February 2020, lower from 13.63% in the previous month.

  • The moderation in inflation has expectedly been led largely by food inflation while core inflation remains muted amid tepid demand.

  • The government has mandated the central bank to keep inflation at 4% with a margin of two percentage points on on either side.

  • With domestic and global growth expected to face downside risks from the spread of COVID-19 and deflationary forces emerging, there is room for up to 50 bps of rate cut by the MPC.

  • The IIP had accelerated 1.6% in January 2019. For January 2020, official data showed that the mining sector output grew 4.4% against a rise of 3.8%, manufacturing output rose 1.5% compared with 1.3% in the year-ago month, and electricity generation rose 3.1% versus 0.9% in January 2019.