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Fuel Prices Drive up Inflation to Five-Month High in June; Industrial Production Slows

June was the eighth straight month in which inflation was higher than the central bank's medium-term target of 4 percent.

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Updated:July 12, 2018, 6:26 PM IST
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Fuel Prices Drive up Inflation to Five-Month High in June; Industrial Production Slows
A woman pushes a shopping trolley at a food superstore in Ahmedabad. (Photo for representation)
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New Delhi: Retail inflation rate accelerated to a five-month high of 5.0 percent in June, government data showed on Thursday, driven by higher fuel prices and a depreciating rupee.

June was the eighth straight month in which inflation was higher than the central bank's medium-term target of 4 percent. Economists polled by news agency Reuters had forecast June's annual increase in the consumer price index at 5.30 percent, compared with May's 4.87 percent.

Thursday's CPI data cements expectations of a hike in key interest rates by the central bank as early as August. The Reserve Bank of India (RBI) last month raised its benchmark interest rate for the first time since 2014, by 25 basis points to 6.25 percent, citing rising inflation.

As per the data released by the Central Statistics Office (CSO), the inflation in the food basket was 2.91 percent, compared to 3.1 percent in May. The inflation in fuel and light category, however, went up to 7.14 percent as against 5.8 per cent in May.

The government has mandated the Reserve Bank to keep inflation at 4 per cent, with a margin of 2 per cent on either side. The RBI Governor headed Monetary Policy Committee will be meeting later this month to review interest rate regime.

Industrial output, on the other hand, slipped to 3.2 percent in May from 4.9 percent in the previous month. Economists surveyed by Reuters had forecast 5.2 percent growth in output compared with a 4.9 percent year-over-year increase in April.

Manufacturing, which contributes 78 percent of industrial output, grew 2.8 percent in May, slower than a 5.2 percent rise in April, as domestic demand slowed.
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