Retail inflation eases to 3-month low of 5.59% in July as food prices drop

New Delhi: India's retail inflation eased to a three-month low in July, back within the Reserve Bank's tolerance level (2 per cent-6 per cent) after staying above the upper band for two straight months, government data released on Thursday showed.

The consumer price index (CPI) based inflation cooled to 5.59 per cent in the last month from 6.26 per cent in June.

Food inflation fell substantially to 3.96 per cent in July from 5.15 per cent in June.

The RBI in latest monetary policy review has kept the rates and stance unchanged and pledged to remain accommodative in the near future, while raising its inflation forecast to 5.7 per cent during 2021-22. RBI projected 5.9 per cent in the second quarter, 5.3 per cent in third, and 5.8 per cent in the fourth quarter of the fiscal, with risks broadly balanced. CPI inflation for Q1FY23 is projected at 5.1 per cent.

Meawhile, Industrial output for the month of June rose 13.6 per cent, in a sign that the low base effect of the last year is waning.

Factory output, measured by the Index of Industrial Production (IIP) had contracted 16.6 per cent in the same month of last year and rose by 29.3 per cent in May.

The mining activity for the reporting month rose 23.1 per cent, while the manufacturing output increased by 13 per cent. Meanwhile, the electricity generation stood at 8.3 per cent in June.

The IIP had contracted 16.6 per cent in June 2020.

During April-June this year, the IIP grew by 45 per cent against a contraction of 35.6 per cent in the same quarter last year.

Industrial production has been hit due to the coronavirus pandemic since March last year when it had contracted 18.7 per cent.

It shrank 57.3 per cent in April 2020 due to a decline in economic activities in the wake of the lockdown to curb the spread of coronavirus infections.