Economy: Mixed Signals

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 showed retail inflation, as measured by the 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 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.

Several economists backed calls for a cut in interest rates. India Inc stepped up their demand for a rate cut.

No comments: