: Inflation surges to 8-year high #FinanceIndia #StockMarketNEWS #Business Press Trust of India New Delhi India’s headline inflation galloped for a seventh straight month to touch an 8-year

@StockMarketNEWS Tue 17 May, 2022

Posted in: #FinanceIndia #StockMarketNEWS #Business

Inflation surges to 8-year high #FinanceIndia #StockMarketNEWS #Business
Press Trust of India

New Delhi

India’s headline inflation galloped for a seventh straight month to touch an 8-year high of 7. 79% in April on rising food and fuel prices, raising the odds of an interest rate hike by the Reserve Bank of India (RBI) early next month to tame prices.

With factory output measured in terms of the Index of Industrial Production (IIP) remaining subdued at 1. 9% in March, some economists feel that another interest rate hike on the heels of a 40 basis points increase last week may slow economic growth.

Retail inflation (CPI) in April soared to a 95-month high on the back of a surge in prices across all major commodity groups. It was way back in May 2014 that CPI inflation was at 8. 3%.

Led by cereals and products (21 months high), vegetables (17 months high), and spices (17 months high), consumer food price inflation jumped to 8. 38% (17 months high), according to data released by National Statistical Office (NSO) on Thursday.

The second-round impact of higher fuel prices has started reflecting on other goods and services also.

Core inflation, which has remained at more than 5% for 24 consecutive months, in April also touched 95-month high at 6. 97%.

“Given these trends, the RBI may consider increasing the policy rate further by 50 basis points or more in one or two steps,??? said D. K. Srivastava, Chief Policy Advisory, EY India. “With higher rates, investment and growth may be adversely affected. ???

WPI inflation has tended to be even higher than the CPI inflation in recent months. It was at 14. 5% in March.

India Ratings expected monetary tightening to continue and increase in repo rates by 60-75 bps and cash reserve ratio by 50 bps in FY23.

RBI had last week raised CRR by 50 bps.

Index of Industrial Production (IIP) growth of 1. 9% year-on-year in March was a five-month high and compared with 1. 5% in the previous month, according to official data released Thursday.

Electricity production recorded the sharpest increase, as it rose 6. 1% while mining activity slowed slightly to 4%. Manufacturing activity (the highest weight in IIP) improved marginally to 0. 9%.

On a year-on-year basis, growth improved for only primary goods, while both consumer durables and non-durables contracted at a slower pace. The growth in remaining sectors moderated from the previous month’s levels.

Sreejith Balasubramanian, an economist at IDFC AMC said the upside surprise in the April CPI was driven by food and on the ‘core’ side by housing, clothing and transportation and communication.

“Thus momentum in core-CPI, which was already high and sticky throughout FY22, picked up strongly and also reflected the fuel price hikes???.