Inflation and Industrial Production Data – June 2024

In June 2024, India’s retail inflation reached a four-month high of 5.08%, driven by a sharp rise in food prices, particularly vegetables, amidst extended heatwave conditions. This surge marks the 57th consecutive month above the RBI’s 4% target range, limiting immediate prospects for interest rate cuts.

Key Points

• Food inflation rose to 9.36%, the highest in six months, with vegetables recording a notable increase.
• Core inflation remained steady at 3.14%, indicating sustained pressures despite moderate non-food inflation.

Regional Variations

• Several states, including Odisha and Bihar, reported inflation rates higher than the national average.

Index of Industrial Production (IIP) Hits Seven-Month High

India’s IIP grew by 5.9% in May 2024, the highest since October 2023, propelled by increased manufacturing and electricity production amidst rising demand during the heatwave.

Sectoral Insights

• Manufacturing output expanded by 4.6%, with significant contributions from consumer durables.
• Electricity generation surged by 13.7%, reflecting heightened power demand.

Segment Analysis

• Capital goods production grew modestly at 2.5%, while consumer non-durables saw subdued growth at 2.3%.

Implications and Outlook

The latest economic data underscores challenges for monetary policy, with inflationary pressures from food prices likely to influence RBI’s upcoming decisions. The industrial growth, while positive, faces uncertainties amid persisting inflationary trends.