Price stability must be maintained even as steps to boost demand are taken
The latest retail inflation and industrial output data from the National Statistical Office (NSO) offer some relief from the pall of gloom cast by the relentless second wave of the COVID-19 pandemic. Provisional headline inflation slowed to a three-month low of 4.29% in April, helped by softer food prices and a statistical base effect. The rate using an imputed index for the year-earlier period was 7.22%. A separate NSO release showed March industrial output jumped by 22.4%, benefiting again from the fact that the Index of Industrial Production (IIP) had posted an 18.7% contraction in March 2020, when the economy was halted by the start of a nationwide lockdown. A closer look at the inflation data reveals a substantial cooling in the prices of cereals, milk and milk products, vegetables, and pulses and products. While both cereals and vegetables saw a deflationary trend widen to -2.96% and -14.2%, respectively, dairy products, which have the second-largest weight in the food and beverages category, also slid into deflation territory at -0.13%. And price gains in pulses, which had been bothering monetary policy makers by having been stubbornly stuck in the double digits over an 18-month stretch, decelerated into single digits to reach a 20-month low of 7.51%. The combined impact slowed inflation across the food and beverages group by more than 250 basis points to 2.66%.