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Consumer Inflation Hits 10-Month High Of 3.21% In August: 10 Things To Know

Thursday's data also meant consumer inflation came in below the Reserve Bank of India's medium-term target for the thirteenth month in a row.

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Consumer Inflation Hits 10-Month High Of 3.21% In August: 10 Things To Know

The RBI has said it sees consumer inflation within its target range over a 12-month horizon

Consumer inflation came in at 3.21 per cent in August, government data showed on Thursday. That marked the highest level recorded since October last year, when it had stood at 3.38 per cent. Consumer inflation or the rate of increase in consumer prices is determined by the Consumer Price Index (CPI). The Reserve Bank of India (RBI) tracks consumer inflation primarily while formulating its monetary policy. Separate official data showed growth in industrial production was at 4.3 per cent in July, as against 2 per cent the previous month.
Here are 10 things to know about the macroeconomic data released today:
  1. Thursday's data showed consumer inflation was lower than economists' estimates. More than 40 economists polled by news agency Reuters had forecast consumer inflation at 3.3 per cent in August. Their forecasts ranged between 3.00-3.50 per cent.
  2. Thursday's data also meant consumer inflation came in below the Reserve Bank of India's medium-term target of 4 per cent for the thirteenth month in a row.
  3. That also meant the longest stretch of retail inflation being contained below the target since the introduction of the index in January 2012.
  4. Economists say the macroeconomic data highlights weakness in aggregate demand. 
  5. "Both industrial production growth and headline CPI are consistent with their ongoing trends. While the capital goods and consumer durables sectors continue to contract, a definite uptick is seen in consumer non-durables,” said Rupa Rege-Nitsure, group chief economist, L&T Finance Holdings. “This shows some revival in rural demand, perhaps on the back of improving monsoon penetration.”
  6. The central bank has so far this year reduced the repo rate - or the key interest rate at which it lends short-term funds to commercial banks - by 110 basis points (1.1 percentage point) in four consecutive bi-monthly reviews.
  7. In its policy statement on August 7, the RBI said it sees consumer inflation remaining within its target range over a 12-month horizon. It has projected retail inflation at 3.1 per cent in the second quarter and 3.5-3.7 per cent in the second half of the current financial year.
  8. Some say the latest data leaves room for the central bank to reduce key rates in its next bi-monthly review due in October. “India's growth has slumped significantly. The recent GDP figure of 5 per cent was so alarming that along with muted inflation it has kept the door open for at least one more rate cut by RBI,” said Rahul Gupta, currency research head, Emkay Global Financial Services.
  9. Data last month showed economic growth slowed to a six-year low of 5.0 per cent in the quarter ended June 30. The five straight quarters of slowing growth mark the longest slump since 2012.
  10. Industrial production or factory output in July was better than economists' estimates. Analysts polled by Reuters had forecast a reading of 2.3 per cent. Factory output or industrial production is gauged by the Index of Industrial Production (IIP). 




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Highlights

1
August consumer inflation at highest level recorded since October 2018
2
Inflation below RBI's medium term target for 13 months in a row
3
Factory output growth at 4.3% in July, as against 2% in previous month

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