Retail Inflation Eases To 4.35 Per Cent In September 2021

"... has been driven primarily by food items, and to a small extent, housing. Other sub-sectors recorded flat or higher inflation reading in September 2021, which is a concern given the looming sceptre of rising energy, metals and logistical costs," Aditi Nayar, chief economist ICRA, said.

Inflation in cereals and products contracted 0.61% while that in vegetables contracted 22.47%. Inflation in meat and fish increased to 7.99%, eggs to 7.06%, and fuel and light to 13.63%.

"The MPC (monetary policy committee) will choose to continue to ignore supply-side risks to inflation, especially if they emanate from a global surge in commodity prices, on which monetary policy has little impact, and change the stance only after a durable domestic demand revival emboldens producers to raise prices," Nayar said.

Index for Industrial Production (IIP) for August 2021 grew at 11.9%. This compares to a growth of 11.5% recorded in July 2021. IIP helps gauge manufacturing activity undertaken in an economy by varied sectors in a given period.

"With the excess rainfall affecting mining, electricity and construction activities, and the non-availability of semiconductors impinging upon auto output, we expect the IIP growth to dip sharply to 3-5% in September 2021," Nayar said.

Mining grew 23.6% in August while manufacturing grew 9.7%, and electricity 16%. Primary goods grew 17%, capital goods 19.9%, intermediate goods 10.3%, infrastructure 11.1%, consumer durables 8%, and consumer non-durables 5.2%.

"The healthy GST e-way bill generation for early October 2021 suggests inventory buildup ahead of the festive season, which augurs well for the IIP print for the current month, even as continued constraints in the auto sector and the looming concerns on availability of coal and power pose risks," Nayar said.