Sunday, July 14, 2024

May Economic Update: From Inflation To Output

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The Indian economy displayed healthy signs of stability and resilience in the early months of FY24-25. According to recent economic update, India has clocked in greater factory output along with easing in retail inflation.

The Retail inflation is at its lowest in 12 months. According to recent data, it has reduced from 4.83% in April to 4.75% in May. This comes as a surprise for the figure is much lower than what most economists had predicted. Moreover, this reflects that since September 2023 the retail inflation is well within the RBI’s target range of 2-6%.

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The Ministry data stated, “Year-on-year inflation rate based on the all-India Consumer Price Index (CPI) number is 4.75% (Provisional) for May 2024. Corresponding inflation rates for rural and urban areas are 5.28% and 4.15%, respectively.”

Easing Inflation-

It should be noted that the inflation in spices category has declined considerably on year on year basis when compared to April 2024.

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Coming to other groups, inflation has also eased in “Clothing & Footwear”, “Housing” and miscellaneous category since April. However, Rajani Sinha, chief economist at CareEdge, stated, “Core inflation continued to remain benign and moderated further to 3.1% in May. However, high inflation in the food basket, especially in specific categories like vegetables and pulses, remains a concern.”

Even though some many say that the decrease is marginal yet, it this brings stability and flexibility for the RBI. Meanwhile , Uttarakhand and Delhi reported slowest retail inflation of 3.37% and 1.99% respectively in the month of May.

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Industrial Output-

In the meantime, the industrial output has increased from 4.9% in March to 5% in April. This upturn is after 8 months of low since November 2023 when it was 2.5%. Overall, the factory output has increased by 5.9% during April-March 2024. This is slightly above the last years growth of 5.2% during the same time period. While Odisha and Karnataka reported highest retail inflation of 6.25% and 6.11% respectively.

In April, the manufacturing sector grew 3.9% annually, the mining sector by 6.7% and the electricity sector grew 10.2%. Since November last year, the industrial growth has shown signs of recovery. The production of capital goods has also increased. this sector witnessed a rise of 3.1% annually in April. While the production of consumer durables rose by 9.8%.

According to Madan Sabnavis, chief economist at Bank of Baroda, “In terms of use-based classification, the infra and primary goods segments witnessed steady growth due to the infra activity going on…Consumer durables demand may be attributed partly to rural spending as well as wedding season where people tend to buy more of these goods in April-May.”







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