Data released by the National Statistical Office (NSO) on Tuesday showed retail inflation, as measured by the consumer price index, slowed to 4.4% in September, lower than the 5.3% in August, providing headroom to the central bank to move on interest rates if the softness persists. The rate was at 7.3% in September 2020. Rural inflation in September was at 4.1%, while urban was at 4.6%. The food price index was at 0.7% during the month, lower than the 3.1% in August.
Prices of vegetables fell an annual 22.5% in September, while cereals and products contracted 0.6%. Oils and fats maintained their pressure, rising 34.2%, while fuel and light rose 13.6% during the month.
“However, oils and pulses still are major pressure points. Also, vegetable prices have started moving up quite sharply of late, which are not getting covered here due to the base effect,” Care Ratings said in a note. “Particularly worrisome is the fact that fuel and light is up by 13.6% and with both petrol and diesel prices increasing across the country, pressure on inflation will remain,” said the ratings agency.
Experts expect RBI to continue with easy policy stance and wait for some time before moving on rates, most probably early next year.
Separate data showed industrial production growth for August was at a robust 11.9%, marginally higher than the 11.5% recorded in July. Economists said a comparison with the 2019 IIP data showed that industrial activity touched the pre-pandemic level.
“Encouragingly, the IIP rose by 3.9% in August 2021 relative to the pre-Covid level of August 2019, led by all the categories except consumer durables, highlighting the enduring impact of the pandemic on big-ticket demand,” said Aditi Nayar, chief economist at ratings agency Icra.
“With the excess rainfall affecting mining, electricity and construction activities, and the non-availability of semiconductors impinging upon auto output, we expect IIP growth to dip sharply to 3-5% in September 2021. Subsequently, the healthy GST e-way bill generation for early October 2021 suggests inventory buildup ahead of the festive season, which augurs well for the IIP print for the current month, even as continued constraints in the auto sector and the looming concerns on availability of coal and power pose risks,” said Nayar.