Inflation jumps to four-month high, factory growth steady
Retail inflation continued its upward trajectory and recorded a four-month high of 4.87 per cent in May compared to 4.58 per cent in April fueled by rising crude oil prices. May will be the seventh straight month when inflation crossed the Reserve Bank of India’s (RBI) medium-term target of 4 per cent.
“Rising crude prices would not only impact headline inflation but would also put pressure on price levels as the twin deficit goes up,” noted Kunal Kundu, an economist at Societe Generale, referring to India’s budget and current account gaps.
Meanwhile, industrial output also continued its upward trend, rising to 4.9 per cent in April compared to a five-month low of 4.4 per cent that it hit in March.
April jump was largely due to a pick-up in manufacturing. Manufacturing sector grew 5.2 percent in April compared with a 4.4 percent rise in March. Mining activity rose 5.1 percent compared with a 2.8 percent growth in March. Infrastructure and construction goods’ output grew 7.5 percent.
The government’s plan to increase rural spending and the minimum support price for farmers ahead of general elections next year will exacerbate price pressures and is likely to blow out the fiscal deficit target. What has also not helped is the weakening rupee, which has shed 5.7% against the dollar this year.
“Rising crude prices would not only impact headline inflation but would also put pressure on price levels as the twin deficit goes up,” noted Kunal Kundu, an economist at Societe Generale, referring to India’s budget and current account gaps.
Meanwhile, industrial output also continued its upward trend, rising to 4.9 per cent in April compared to a five-month low of 4.4 per cent that it hit in March.
April jump was largely due to a pick-up in manufacturing. Manufacturing sector grew 5.2 percent in April compared with a 4.4 percent rise in March. Mining activity rose 5.1 percent compared with a 2.8 percent growth in March. Infrastructure and construction goods’ output grew 7.5 percent.
Here is the factory output trend MoM #IIPData https://t.co/EykQQmoATQ
— ET NOW (@ETNOWlive) 1528805804000The government’s plan to increase rural spending and the minimum support price for farmers ahead of general elections next year will exacerbate price pressures and is likely to blow out the fiscal deficit target. What has also not helped is the weakening rupee, which has shed 5.7% against the dollar this year.