The Index of Industrial Production (IIP) and Consumer Price Index (CPI) figures were released recently for August 2021.
What does the data show?
IIP - Industrial output rose 11.9% in August 2021, showing a double-digit year-on-year increase.
The IIP constituents [mining, manufacturing and electricity] posted appreciable improvements of 23.6%, 9.7% and 16%, respectively.
But there were contractions in last year when the economy was still struggling to recover from the first COVID-19 lockdown.
So, the eroded base in the case of August 2020 IIP data disguises the fact that output actually shrank 0.2% on a month-on-month basis this year.
Mining and manufacturing (together account for 94% of the index) posted sequential contractions of 0.8% and 0.5%, respectively.
Only consumer non-durables and construction goods posted increases from July 2021.
The slowdown in the consumer durables category reflects the lack of demand for white goods amid the pandemic.
CPI - Inflation in September 2021 slowed by 95 basis points from the preceding month to 4.35%.
CPI-based inflation eases towards the RBI’s mandated target of 4%.
Retail inflation has thus shown a sharp slowdown in price gains.
But inflation too has benefited from the elevated levels in the year-earlier period when the headline reading had accelerated to 7.3% in September 2020.
So the CPI data masks the real extent of price pressures across major product categories.
With global crude oil ruling near 3-year highs, the Central and State governments should respond to the RBI’s entreaties and cut fuel levies.
Unless this happens, there is little scope for inflation easing by much in this category.
Source: The Hindu
Quick Facts
Index of Industrial Production (IIP)
IIP is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period of time, with respect to a chosen base period.
It is compiled and published on a monthly basis by the CSO (now known as National Statistics Office (NSO)) with a time lag of 6 weeks from the reference month.
Consumer Price Index (CPI)
The CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.
The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.
India uses 2012 as the base year for calculating CPI.
