(LiveMint)
India’s factory output growth slowed to a seven-month low in May while retail inflation quickened to a five-month high in June, signalling a worsening macro-economic environment. Data released by the statistics department showed the index of industrial production (IIP) grew at 3.2% in May compared with a revised 4.8% growth a month ago while Consumer Price Index (CPI) based inflation accelerated by 5% in June against 4.87% in the preceding month.
A surge in crude oil prices, weakening rupee and increase in minimum support price (MSP) of summer-sown crops by the government are further expected to put upward pressure on retail inflation. India Ratings and Research estimates the hike in MSP for the 2018-2019 season will push up retail inflation by 70 basis points. One basis point is one-hundredth of a percentage point. While the monsoon has gained pace earlier than expected, nationwide rainfall deficit in the season stands at 8% till Thursday. Although the India Meteorological Department has projected a normal monsoon, its distribution and intensity in July will be crucial for kharif output, which in turn will impact food inflation.
