NEW DELHI: Retail inflation dipped to a record low in June on the back of sliding food prices, while industrial output growth slowed in May as manufacturing remained sluggish, mounting pressure on the RBI to cut interest rates when it reviews monetary policy on August 2.
Data released by the Central Statistics Office (CSO) on Wednesday showed retail inflation, as measured by the consumer price index (CPI), rose an annual 1.5% in June, slower than previous month’s 2.2%. This was the slowest pace of increase since the government unveiled the new retail inflation series in 2012. The previous lows were in 1999 and in 1978 under a different series.
Retail inflation has remained well below the central bank’s target of 4% and triggered calls for a cut in interest rates. The RBI has not obliged with a rate cut but preferred to take a cautious view of the price situation.
Separate data released by CSO showed industrial output growth slowed to an annual 1.7% in May compared with 8% expansion in the same month last year. The manufacturing sector grew 1.2% against 8.6% in May 2016, while the mining sector contracted 0.9% compared to a growth of 5.7% in the year ago period.
"Moreover, the continued trimming of inventories prior to the onset of GST may result in a substantial decline in the IIP growth in June 2017 relative to the healthy 8.9% recorded in June 2016," said Aditi Nayar, principal economist at credit rating agency ICRA.
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