Showing an upward trend in economy, Index of Industrial Production (IIP) grew 7.1 per cent in February this year, mainly driven by robust performance of the manufacturing sector coupled with higher offtake of capital goods and consumer durables. Similarly, the annual retail inflation eased for the third straight month in March to 4.28 per cent due to cooling down of food as well as vegetable prices.
While on month-on-month basis, the factory output declined from 7.4 per cent in January to 7.1 per cent in February, the current figure showed a positive trend on annual basis. The IIP stood at a mere 1.2 per cent same period last year.
As per data released by the Central Statistics Office (CSO) on Thursday, retail inflation eased to a five-month low in March, but remained above medium-term target of Reserve Bank of India (RBI), supporting views that monetary policy is likely to remain unchanged at the next review in early June. It was 4.44 per cent in February 2018. last week, RBI lowered its April-September retail inflation projection to 4.7 per cent to 5.1 per cent, from a previous range of 5.1 per cent to 5.6 per cent released in February.
As far as industry output is concerned, the Government’s revised data showed that IIP recorded a growth of 8.54 per cent in November, 7.1 per cent in December and 7.4 per cent in January.
“During April-February, IIP growth has slowed to 4.3 per cent from 4.7 per cent in the same period last fiscal,” it said.
However, experts believe that this growth trend gives confidence that the industrial recovery is broadening. “Higher growth was boosted by the low base affect. Nonetheless, this is the first instance of four consecutive months of IIP growth of more than 7.1 per cent in the 2011-12 base data. The recovery was led by manufacturing, up 8.7 per cent in February 2018, once again four consecutive months of over 8.5 per cent increase in the manufacturing IIP in the new base data,” said Dr Devendra Kumar Pant, Chief Economist and Dr Sunil Sinha, Principal Economist, India Ratings and Research.
The data further said manufacturing sector, which constitutes over 77 per cent of the index, grew at 8.7 per cent in February as compared to almost flat growth of 0.7 per cent in the same month a year ago. “Similarly, capital goods output rose by a robust 20 per cent in the month under review as against a contraction of 2.4 per cent earlier,” it added.
Also, consumer durables too grew at 7.9 per cent as against a contraction of 4.6 per cent in February 2017. Electricity generation also grew by 4.5 per cent compared to 1.2 per cent. However, mining output declined by 0.3 per cent against a growth 4.6 per cent earlier, it added.
As far as retail inflation is concerned, it slowed to 4.28 per cent in March, giving a positive boost to common man as it showed easing of food prices including vegetables. As per the CSO data, inflation in the vegetables segment cooled to 11.7 per cent in March from 17.57 per cent in the previous month. “The rate of price rise in the protein rich items like eggs, milk and other products too moderated in March as against the previous month. However, inflation in fruits basket was higher,” it said.
Overall, it added, inflation in the food basket was 2.81 per cent, lower than 3.26 per cent in February. The data further revealed that inflation in the fuel and light segment also came in lower at 5.73 per cent month-on-month basis.
“Despite the positive news on the food inflation front, we believe that inflationary pressures remain tilted to the upside and are likely to hover around the 5 per cent mark in FY 2018-19. Expected risks may arise from fiscal slippage, higher input costs and MSP hikes while financial sector volatility with respect to the normalization policy in the US may cause further tension,” Anis Chakravarty, lead economist, Deloitte India.