Inflation picks up as January IIP contract

Retail inflation peaked at 5.03% in February, driven by a three-month high, higher food and fuel prices, official data released on Friday showed.

Food price inflation, measured by the Consumer Food Price Index (CFPI), rose to 3.87% in January last month from 1.96% in January. While oil and fat prices rose 20.8% from a year earlier, prices of pulses and products climbed to 12.5%, while meat and fish prices rose 11.3%, eggs (11.1%) and fruits (6.28%). Hui.

Prices were narrowed to 6.27% after vegetable prices, which have been soft in recent months, fell 15.8% in January.

Inflation in the transport and communications category was 11.4%, a sharp jump from January’s 9.3%.

The upsurge in retail inflation mainly stemmed from high food inflation, said Sunil Kumar Sinha, Principal Economist, India Ratings and Research.

The weakening of the base effect in February 2021 contributed to higher food inflation. Vegetable prices remained in deflationary mode for the third consecutive month. However, deflation slowed to 6.3% in February 2021, ”he said.

Mr. Sinha said that the combination of higher crude oil prices and higher excise duty pushed higher retail prices of fuel to four-month highs in transport and communication inflation.

“Health inflation … was a 17-month high at 6.3% and is structurally changing,” he said.

Factory output retreats

Industrial production contracted 1.6% in January, mainly due to a decline in production in the capital goods, manufacturing and mining sectors, the Press Trust of India reported, citing a separate official release.

Manufacturing sector output, which is 77.6% of the Index of Industrial Production (IIP), decreased by 2% in January, compared to a growth of 1.8% in the same month in the previous financial year.

‘To cover some distance’

Brickworks Ratings Chief Economic Advisor M. Govinda Rao said in a statement, “The contraction in IIP numbers for January has come down to -1.6% for January, which makes it a little surprise after being positive in December (1.04%).” The economist said, “The manufacturing sector continues at 2% and shows that we still have some distance before the economy improves.”

“Going forward, excess liquidity in the system combined with volatility in fuel prices can pose a high risk for inflation,” Dr Rao said. “RBI may take some measures to eliminate excess liquidity,” he said.