Governance & Social Justice
- Is it Unhealthy to Eat out in India?
- New National Education Policy
- SDG Gender Index 2019
- Self Help Group market linkages
- Supreme Court stops Maharashtra EWS quota
- Draft National Education Policy Controversy
- Acute Encephalitis Syndrome in muzaffarpur of bihar
- Private sector specialist in government jobs
- Abujh Maria PVTGs
- AWaRe: A WHO tool for safer use of antibiotics
- Digital Village Scheme 2.0
- Back to Village program in Jammu & Kashmir
- Child Labour in India – National Child Labour Project Scheme
- Operation Cleanup begins, Modi Government 2.0 dismisses corrupt officials
- 23rd St Petersburg International Economic Forum
- Will Financial Action Task Force put Pakistan in its Blacklist
- How powerful is the International Court of Justice?
- PM Modi in Maldives
- U.S. Now Requiring Social Media Details From All Visa Applicants
- United Nations Demands Britain To End Rule Of Chagos Islands In Six Months
- Chinese Language made Compulsory in Nepal
- Hong Kong Protests 2019
- India Invited to G-7 Summit
- PM Modi in Sri Lanka
- SCO Summit 2019
- Indian Navy Launches Operation Sankalp
- Iran shoots down US drone aircraft
- Pakistan Saved from FATF BlackList
- India warns of Commonwealth Games boycott
- Sudan political crisis
- Foreign Policy of India
- Modi 2.0, Ministry of External Affairs Opportunities & Challenges
- Guthi Bill protests in Nepal
- G 20 Summit 2019
- United Nation security council
- Agricultural self sustainability & food security of India
- Benefits of Cluster based modern Industry
- CBDT tweaks Income Tax rules for Senior Citizens
- Code on Wages Bill needs to be tweaked
- Custom Reforms in India
- Food processing in India
- Foreign Trade of India
- How to revive demand in Indian Economy?
- India’s Foreign Trade Slowdown
- India’s solar manufacturing strategy
- IndiGo Promoters Spat Controversy
- RBI’s revised circular on NPA
- Status of Self Employment in India
- What is Demographic Distress?
- What is Priority Sector Lending Limit?
- What is Strategic Overseas Fund?
- Jal Shakti Ministry launched
- India No Longer World’s Fastest Growing Economy
- Kolhapuri Chappal get Geographical Indication Tag
- Kaleshwaram Lift Irrigation Project
- Government’s plan for Digital Payment in India
- Retail inflation at 7 month high
- What is Middle Income Trap?
- Wholesale Price Index Inflation hits 22 month low in May
- India & World Trade Organisation
- India USA Trade War
- RBI purchases Government Securities worth Rs 12500 Crore
- What are BASEL III norms?
- World Bank’s Global Economic Prospects Report
- SEBI new norms for Credit Rating Agencies
- Telecom Sector in India
- Chennai water crisis
- One Nation one ration card
- Railway testing Tri-Netra Technology
Defence & Security
Science & Technology
- Air Pollution and Human Health
- Chennai Salem Highway Case Controversy
- Global Concentration of Atmospheric CO2
- One Health Philosophy
- Arctic Kelps: Underwater forests in the Arctic
- India unlikely to meet carbon sink commitment
- Asiatic lion radio collaring
- Japan decides to start Commercial Whale Hunting
- Phayeng becomes first Carbon Positive village
- Fall Army Worm Attack in India
Tag: GS 3 || Economy || Banking & Financial Sector || Inflation
Why in news?
- Retail inflation surged to a seven-month high in May 2019. It is the fourth consecutive monthly rise.
- But there is some good news as the financial year 2019-20 began on a positive note with the industrial sector registering 3.4% growth in April.
Why is this critical?
- Budget scheduled: The data is critical as the General Budget is scheduled to be presented on July 5.
- Overall industrial scenario is not satisfactory: Though the latest monthly data is encouraging, the overall industrial scenario is not so upbeat, as various sectors, and in particular the automobile and FMCG sectors, are facing slowdown in sales — a reason for India Inc to seek some relief and incentives in the Budget.
- Retail inflation within inflation targeting: Though the rate of retail inflation has gone up, it is still below 4%, the median rate for inflation targeting.
- Possibility of another rate cut: This opens the possibility of one more rate cut during the fiscal, if not in the August policy review.
- The MPC, chaired by the RBI Governor, went for three successive policy rate cuts with the latest one being earlier this month.
- It also changed its stance to ‘accommodative’ from ‘neutral’.
- Considering comprehensive and coordinated approach for growth, the market is expecting another rate cut and/or liquidity enhancing measures such as lowering cash reserve ratio (CRR).
- Indicated by CPI: Rate of retail inflation as indicated by the Consumer Price Index (CPI) recorded 3.05% in May, as against 2.99% in April.
- Food inflation: This is highest after October, 2018. Food inflation (May 2019: 1.83%, April 2019: 1.10%) was the major driver for retail inflation.
- Vegetables and pulses were major drivers of food inflation.
- Vegetables inflation at 5.5% was 11-month high and
- pulses witnessed inflation after a gap of 29 months.
- While vegetables inflation is mainly due to summer seasons and are cyclical in nature, the expectation is that it is likely to go up further as prices tend to rise during the monsoon.
- Supportive of growth: The RBI may continue to pursue policy that would be supportive of growth.
- Further cut expected: The RBI has cut policy rates in the last three monetary policy reviews.
- Although the impact of the monetary policy is felt with a lag, India Ratings believes there is still a scope of one more rate cut in FY20.
- However, besides being dependent on data it will also take into consideration fiscal policy stance of the government.
- Indicated by IIP: Meanwhile, industrial growth, as indicated by Index of Industrial production (IIP) rose to 3.4% in April as against the revised 0.35% in March, however lower than 4.5% during May 2018.
- At a broad classification level the main thrust to IIP growth came from electricity and mining sector but growth in the manufacturing sector is still below 3% which is affecting not just overall industrial growth but also employment scenario,
- However, the whole picture is not very encouraging on the industrial production front.
- Given the fluctuation in the IIP growth data it is difficult to believe that we are on our way or anywhere near to a broad based and sustainable industrial recovery.
- Examine the causes driving the rising inflation. Suggest measures that should be adopted to keep inflation in check.