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IIP and CPI data - August 2021

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October 14, 2021

Why in news?

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.

IIP CPI

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.
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