India’s retail inflation fall to RBI’s comfort zone

India’s retail inflation fall to RBI’s comfort zone

India registered retail inflation for the month of November 2022 at 5.88% recently.

India’s retail inflation decreased to an 11-month low in November, falling below the central bank’s upper target limit of 6% for the first time since December last year.

The Index of Industrial Production (IIP) contracted 4% in the festive month of October, indicating the impact of spillovers from a slowing global economy, compared with an expansion of 3.5% in September.

Is RBI continuing tightening rates?

Economists believed monetary tightening to continue as the central bank is unlikely to lower its guard.

However, they also believe that rate hikes to be smaller in view of rising concerns over the weakness in the economy.

Recently the Reserve Bank of India (RBI) hiked interest rates by 35 basis points (bps) to 6.25% on December 7 following three successive 50 bps increases to tame inflation.

Procedures followed by RBI:

A basis point is 0.01 percentage point. The RBI is assigned to keep inflation at 4% with a tolerance band of two percentage points on either side of that.

Following the law, the central bank had sent a report to the government after inflation stayed above 6% for three quarters in a row.

The finance ministry said the immediate action taken by government had helped lower inflation.

Sectoral wise data:

Inflation in vegetables went down 8.08% on year in November while cereals and products derived 12.96%.

Fuel and light inflation came in at 10.62%.

But data released by the ministry of statistics and programme implementation indicated India’s industrial activity slowing down in October as manufacturing fell.

Due to slowing manufacturing activity, India’s industrial output also contracted 4% in October from the year earlier.

Manufacturing sector fell 5.6%, while mining and electricity grew 2.5% and 1.2%, respectively.

Overall industrial production growth in the April-October period had been registered at 5.3% against 20.5% a year ago.

Export-focused sectors like textile, apparel, leather products, and pharmaceuticals faced a sharp downfall in October.

Capital goods output which is an indicator of investment has showed fall of 2.3% in November while consumer durables production to 15.3%.

These data of some main sectors output indicating sluggish urban demand. Consumer durables output slumped 13.4%.

Question & Answer:

Q1. How much percent retail inflation for the month of November 2022 has been registered?

Ans. 5.88%

Q2. The Reserve Bank of India has recently raised repo rate at what percent to control inflation?

Ans. 6.25%

Q3. What is the range of RBI’s tolerance band for retail inflation?

Ans. 2% to 6%

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