Retail inflation inched up to 4.48 per cent in October due to an uptick in food prices, government data showed on Friday. The Consumer Price Index (CPI) based inflation was at 4.35 per cent in September and 7.61 per cent in October 2020.
Growing for the third consecutive month, the country's exports rose marginally by 0.67 per cent year-on-year to $27.93 billion in February even as trade deficit widened to $12.62 billion, according to official data released on Monday.
After the RBI surprised the Centre with a record Rs 99,122 crore in surplus transfer for FY21, analysts said this will help the government tide over the revenue losses from lockdowns and extend more support to the pandemic hit industries and to the poor people. In fiscal 2020, the RBI had paid only Rs 57,128 crore in dividend to the government and the finance minister had budgeted only Rs 45,000 crore from the central bank. The higher payout followed the Bimal Jalan panel report that had set a new economic framework capital buffer for the central bank along with the contingency risk buffer at 5.5 per cent.
Retail inflation hit an eight-month high of 6.07 per cent in February, remaining above the RBI's comfort level for the second month in a row, while wholesale price-based inflation soared to 13.11 per cent on account of hardening of crude oil and non-food item prices, government data showed on Monday. The previous high for retail inflation was 6.26 per cent in June 2021. The consumer price index (CPI) based retail inflation, which is taken into account by the Reserve Bank of India (RBI) while deciding its monetary policy, rose mainly because of costlier food items, as per the data released by the National Statistical Office (NSO).
Retail inflation slowed to 4.29 per cent in April from 5.52 per cent in March, mainly due to easing food prices, government data showed on Wednesday. The Reserve Bank mainly factors in the retail inflation based on Consumer Price Index (CPI) while arriving at its monetary policy. As per the data released by Ministry of Statistics and Programme Implementation, inflation in the food basket was 2.02 per cent in April, down from 4.87 per cent in the preceding month.
The cost of debt-funds for the states has touched the highest level so far this fiscal with the weighted average cut-off crossing the 7.16 percentage points at the latest auctions, up 11 bps over the past week, reflecting the hardening yields even for the government securities. The hardening of the rates at the first auction of the quarter comes in the wake of the expected large supply of debt from the states, as indicated for Q4 at Rs 3.2 lakh crore, up by Rs 10,000 crore. Nine states on Tuesday raised Rs 18,900 crore at the latest auction of state development loans.
The GDP growth is estimated to come at the "deceptively high" level of 20 per cent for the April-June 2021 quarter but is far below the same in the pre-COVID times, rating agency Icra said on Wednesday. Icra said the low base of the last year, when the GDP had contracted by close to 24 per cent, "conceals" the impact of the second wave of COVID-19 infections. Economic activity is boosted by robust government capital expenditure, merchandise exports and demand from the farm sector, it said, estimating the GDP to grow by 20 per cent and the gross value added (GVA) will register a growth of 17 per cent for the June quarter.
India's GST collection remained above Rs 1 lakh crore for the third month in a row at over Rs 1.17 lakh crore in September, raising expectations that second half of the year will post higher revenues. The tax collections in September on goods sold and services rendered was 23 per cent higher than Rs 95,480 crore collected in September 2020, and 27 per cent higher than Rs 91,916 crore collected in September 2019. The collection in September is the highest in five months since April, when revenue was at record high of Rs 1.41 lakh crore.
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Declining prices of food items like vegetables pulled down retail inflation to 5.59 per cent in July, bringing it back within the RBI's comfort zone after two months, official data showed on Thursday. The retail inflation based on the Consumer Price Index (CPI) had remained above 6 per cent during May and June. The government has mandated the RBI to maintain retail inflation at 4 per cent, with a margin of 2 per cent on either side. The CPI based inflation stood at 6.26 per cent in June 2021 and 6.73 per cent in July 2020.
Subdued prices of food items like vegetables pulled down retail inflation for the third month in a row to 5.3 per cent in August, within the RBI's comfort zone. While the Consumer Price Index (CPI)-based retail inflation declined to 5.3 per cent in August from 6.69 per cent in the same month a year ago, food inflation dipped at a much faster pace to 3.11 per cent from 9.05 per cent in August 2020. The food inflation was also lower than 3.96 per cent in preceding month of July.
India's rupee is likely to remain under pressure due to high prices of crude oil and other commodities, and may stabilise at around 79-80 against the US dollar in the near term, say experts amid limited headroom available with the Reserve Bank to check the weakening of the domestic currency. The currency has slumped over 5 per cent this year after Russia's invasion of Ukraine sent international crude oil prices soaring to a decade high. On Monday, rupee ended at a fresh all-time low of 78.34 (provisional) against the US dollar.
A sharp sell-off in the Indian equities markets after a spike in crude oil prices should not be surprising. Historically there is a negative correlation between stock valuations in India and the price of Brent crude oil, which is the benchmark for the Indian crude oil basket. Between 2011 and 2014, crude oil traded above $100 a barrel for an extended period, the Sensex-trailing price/earnings (P/E) was 18X, on average, during the period, nearly 22 per cent lower than the current index P/E of 23X.
Since January 2021, the inflation rate in health has stood in the range of 6.08-8.44 per cent.
After unseasonal rains, supply disruptions and pandemic-induced woes pushed retail inflation well over the Reserve Bank's comfort zone in 2020, the scenario is likely to stay that way at least in the short term as economic recovery slowly gains foothold. For most part of this year, pricier food items pushed the retail inflation, based on Consumer Price Index (CPI), higher in the range of 6.58-7.61 per cent, except for March when the reading was 5.91 per cent. Experts believe retail inflation is likely to average around 6.3 per cent this fiscal and mostly will remain sticky going forward owing to pick-up in demand across sectors.
As COVID-19 infections spike in the country resulting in restrictions in various states and impacting the fragile recovery, many economists are expecting RBI to delay the policy normalisation move, which is expected in the February review. The country has reported a single-day rise of 58,097 new Covid-19 cases as of Wednesday morning--the highest in around 199 days -- of which 2,135 are Omicron cases and later in the day, the first confirmed Omicron-related death has also been reported. Maharashtra recorded the maximum number of 653 Omicron cases followed by Delhi at 464, Kerala 185, Rajasthan 174, Gujarat 154 and Tamil Nadu 121 cases, taking the total tally of cases to 3,50,18,358.
Retail inflation fell to a five-month low of 4.35 per cent in September from 7.27 per cent in the year-ago period as prices of vegetables and other items declined, according to government data released on Tuesday. The moderation in Consumer Price Index-based inflation is in line with the assessment of Reserve Bank Governor Shaktikanta Das who recently projected substantial softening of retail inflation. The CPI inflation was at 5.3 per cent in August and at 7.27 per cent in September 2020.
However, it may still not change its stance on the policy rate as inflationary pressures are coming from high commodity prices.
With decline in number of fresh COVID-19 cases and easing of restrictions, the country's gross domestic product (GDP) will grow at 8.5 per cent in FY2021-22, according to credit rating agency Icra Ratings. It expects the gross value added (GVA) at basic prices (at constant 2011-12 prices) to grow at 7.3 per cent in FY2022. "The impact of the second wave of COVID-19 and the ensuing state-wise restrictions was seen across a variety of high frequency indicators in April-May 2021.
Inflation print for food articles, as a basket, remained nearly flat at 7.47 per cent during the month.
The wholesale price-based inflation rose for the second consecutive month in February to 4.17 per cent, as food, fuel and power prices spiked. The WPI inflation was 2.03 per cent in January and 2.26 per cent in February last year. After witnessing months of softening of prices, the food articles in February saw 1.36 per cent inflation. In January it was (-) 2.80 per cent.
GST revenue for the month of June stood at Rs 92,849 crore, a 2 per cent increase over the same month a year ago, the Finance Ministry said on Tuesday. The gross GST revenue collected in the month of June 2021 stands at Rs 92,849 crore of which central GST is Rs 16,424 crore, state GST Rs 20,397, Integrated GST Rs 49,079 crore (including Rs 25,762 crore collected on import of goods) and cess is Rs 6,949 crore (including Rs 809 crore collected on import of goods), the ministry said. The GST revenues for the month of June 2021 are 2 per cent higher than Rs 90,917 crore collected in June 2020.
The government on Wednesday asked the Reserve Bank to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for another five-year period ending March 2026. To control the price rise, the government in 2016 gave a mandate to the RBI to keep the retail inflation at 4 per cent with a margin of 2 per cent on either side for a five-year period ending March 31, 2021.
However, Icra Rating Principal Economist Aditi Nayar feels that the numbers are a bit too optimistic and need real heavy-lifting by the Centre and the states. "The survey forecasts on real and nominal GDP will require a substantial push from Central and state spending as private sector capacity expansion is anticipated to be intermittent, and sector-specific in the next couple of quarters," she said. Nayar added that private consumption is likely to chart a differentiated recovery across income and age groups. Based on the comments made in the Survey, she expects the Union Budget to incorporate a growth in gross tax revenue of 15-16 per cent.
The Index of Industrial Production (IIP) grew by 1.4 per cent in November as most components like manufacturing, electricity, mining, primary goods, and consumer durables witnessed a slowdown, according to data released by the National Statistical Office (NSO) on Wednesday. This is on the base of a decline of 1.7 per cent in November 2020 and before the new Covid variant started impacting economic activity. IIP growth was lower than the 4 per cent expansion recorded in the previous month but was better than a 1.6 per cent contraction seen in November 2020. Separately, rising prices of kitchen staples pushed retail inflation, or rate of price increase, to 5.59 per cent in December 2021, bringing it close to the upper band of Reserve Bank's comfort zone.
Production of coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity contracted. The record contraction in the growth rate of eight core sectors will affect the Index of Industrial Production.
India's appetite for imported crude oil may wane in fiscal year (FY) 2023 from record levels in pre-pandemic 2019-20 fiscal as higher oil prices, a spillover from the conflict in Ukraine, and increasing use of biofuels affect domestic demand for petroleum products. Brent crude surged to a nine-year high, shy of a July 2008 record $147.50 a barrel, before declining to around $100 a barrel - but the volatility in commodity rates will slow global economic growth and use of fuels. Demand for all oil products may grow at only 2-3 per cent in FY23, slower than the current fiscal and nearly half the 5.5 per cent growth estimated by the petroleum ministry, according to industry officials.
Domestic ratings agency Icra on Monday forecast a 2 per cent GDP growth in the fourth quarter of 2020-21, and a 7.3 per cent contraction for the full fiscal year. From a GVA or gross value added perspective, the agency pegs Q4 growth at 3 per cent and the full year contraction at 6.3 per cent. According to the agency, the 2 per cent projected GDP growth will help the economy avoid a double-dip recession as indicated by the National Statistical Office (NSO) for Q4. Icra's projection is better than the 8 per cent contraction forecast by the NSO as it sees Q4 growth at only 1.1 per cent.
'Pump prices of petrol and diesel have reached historical highs. An unwinding of taxes on petroleum products by both the Centre and the states could ease the cost-push pressures,' the Monetary Policy Committee (MPC) has said.
With the first quarter gross tax mop-up reaching Rs 5.6 lakh crore, Icra Ratings on Friday said the government is set to exceed the budgeted tax collection target of Rs 22.2 lakh crore for 2021-22, led by indirect taxes. The government has budgeted a modest 9.5 per cent growth in tax collections at Rs 22.2 lakh crore for FY22, over FY21 collections of Rs 20.2 lakh crore. However, despite the second wave of the pandemic, the April-June quarter tax collections rose to Rs 5.6 lakh crore, which is 39 per cent higher than Q1 of FY20.
The retail inflation rate breached the 6 per cent upper tolerance limit of the RBI for the first time in seven months in January, while the wholesale price index stayed in double-digits for the 10th month in a row, showed two sets of data released by the government on Monday. Retail inflation, the key input for the RBI while reviewing the repo rate every two months, soared during the month mainly because of a spike in certain food items. The previous high for retail inflation was 6.26 per cent in June 2021.
Infra segment, refinery product impacted the most, even as contraction narrows in latest month.
At over 6 per cent, most states in October had inflation rates above the Reserve Bank of India's target band of 2-6 per cent.
Industrial production re-entered the negative territory by contracting 1.6 per cent in January, mainly on account of the decline in output of capital goods, manufacturing and mining sectors. The output of the manufacturing sector -- which constitutes 77.6 per cent of the Index of Industrial Production (IIP) -- shrank by 2 per cent in January, as against a growth of 1.8 per cent during the same month last fiscal, as per data released by the government on Friday. The worst performance was witnessed by the capital goods sector, which recorded a contraction of 9.6 per cent during the month under review, compared to a 4.4 per cent decline a year ago.
Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October, keeping it significantly above the comfort zone of the Reserve Bank.
From Covid-19 essentials, such as Vitamin C supplements and thermometers, to bicycles, laptops, and personal weighing scales, demand for certain items galloped during last financial year as the pandemic altered what Indians used on a day-to-day basis. Imports of outdoor sports equipment, handbags for women, and dentures, among others, plummeted. With outdoor activities coming to a halt last year and schools functioning virtually, imports of sports goods witnessed a decline, while inbound shipments of laptops and battery chargers saw a sharp uptick, according to the import data for the financial year 2020-21.
India's industrial production grew by 1 per cent in December, official data showed on Friday. According to the Index of Industrial Production (IIP) data, the manufacturing sector output grew by 1.6 per cent in December 2020.
Agriculture activity, according to recent channel checks by Prabhudas Lilladher, is expected to continue at a strong pace in FY22.
The record contraction in the growth rate of eight core sectors will have its impact on IIP.
Direct economic stimulus measures such as tax cuts for individuals and industry would have helped to prop up the Indian economy which was hit hard by the lockdowns across several states in India, say economists and corporate leaders. While the measures announced on Monday are focussed more on the supply side, these steps would take a lot of time to move the needle for the economy.
Inflation in food articles during June stood at 2.04 per cent, as against 1.13 per cent in May.
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