India’s retail inflation soars four-month high

14 April, 2021 12:00 AM printer

NEW DELHI: India's retail inflation soared to a four-month high in March on the back of high food prices, while industrial output contracted for the second consecutive month in February, adding to worries over health of the economy, amid the backdrop of rising Covid cases.

Data released by the National Statistical Office (NSO) on Monday showed retail inflation as measured by the consumer price index rose an annual 5.5 percent in March, higher than 5 percent recorded in the previous month.

The food price index rose 4.9 percent during the month, higher than 3.9 percent in February, report agencies.

The gap between urban and rural inflation widened. Rural inflation was at 4.6 percent, while urban inflation was at 6.5 percent.

The gap between the two has been widening since December last year.

Food and beverages inflation rose to a four-month high of 5.2 percent in March, while core inflation (excluding food and fuel) shot up to a 32-month high of 5.8 percent during the month.

Economists attributed the increase in food prices to constrained supply, increased demand and higher transportation costs and cautioned that localised lockdowns to curb spread of the infection could further impact prices.

“With renewed pandemic restrictions across the country, elevated global prices across commodities and higher transportation and logistics costs, price pressures are likely to prevail in the coming months for most segments.

We expect CPI inflation to rule above 5 percent for the next two-to-three months,” Madan Sabnavis and Kavita Chacko, economists at Care Ratings, said in a note.

Separate data released by NSO showed industrial production shrank 3.6 percent in February, sharper than the revised 0.9 percent decline posted in previous month, and dragged down by a decline in manufacturing, mining, capital goods, construction goods and consumer nondurables.

The manufacturing sector, which accounts for nearly 77 percent of the index, contracted 3.7 percent in February compared with an expansion of 3.8 percent in the year-ago period.

The only bright spot was consumer durables, which rose 6.3 percent compared to a contraction of 6.2 percent in February 2020.