Industrial output growth slows to 3.4% in June; inflation worrisome
New Delhi: Industrial output slowed down in June to 3.4 percent though it remained in the positive territory for third month in a row, while retail inflation inched up marginally in July on account of costly vegetables.
Not worried over the moderation of IIP, India Inc expects that the steps taken by the government to revive growth will yield results.
According to the government data, factory output measured in term of Index of Industrial Production moderated to 3.4 percent in June from 19 months high of 5 percent recorded in the previous month mainly due to lower output of consumer goods.
On the other hand, retail inflation - based on Consumer Price Index - rose marginally to 7.96 percent in July, from 7.46 percent in June mainly due to higher prices of food items like vegetables, fruits, milk.
As regards IIP, the data revealed that manufacturing, mining and power sectors grew by 1.8 percent, 4.3 percent and 15.3 percent respectively. Besides the output of capital goods recorded a growth of 23 percent.
Overall, 15 of the 22 industry groups in manufacturing showed positive growth in June.
Commenting on the data, Ficci President Sidharth Birla said: "Sectors like consumer goods remain a cause of concern. We are hopeful that the steps taken by the government so far and measures announced in the Budget will help in further revival of the sector."
Output of consumer goods contracted by 10 percent in June compared to the contraction of 1.5 percent a year ago. For the April-June quarter, the segment has logged a contraction of 3.6 percent, compared to a decline of 2.1 percent in the same period of 2013-14.
The consumer durables segment declined by 23.4 percent in June, as against a dip of 10.1 percent a year ago. For April- June, it declined by 9.6 percent as against a dip of 12.7 percent in the first quarter of last fiscal.
Similarly, the consumer non-durable goods output grew at a meagre rate of 0.1 percent in June compared to 6.2 percent in same month last year. During April-June, the segment grew at 0.7 percent compared to 7.1 percent in same period last fiscal.
Commenting on the moderation in growth of industrial production in June, CII Director General Chandrajit Banerjee said: "...We would like to see this as an aberration, as CII?s own Business Outlook Survey and the ASCON survey are showing early signs of an industrial turnaround."
According to him, with proper interventions in the areas of land, labour and environment norms, manufacturing can post a quick revival.
"We are already seeing a lot of proactive reforms being brought about by the government in the labour space. Industry also looks forward to change in the areas of land acquisition and other factors that could promote ease of doing business," he added.
Manufacturing, which constitutes over 75 percent of the index, grew 1.8 percent in June, compared to decline in output by 1.7 percent a year ago. For April-June, the sector grew at 3.1 percent growth, compared to the contraction of 1.1 percent in the year-ago period.
The production of capital goods, a barometer of demand, grew by 23 percent in June, in sharp contrast to contraction in output by 6.6 percent in same month of last year.
For the April-June period, the capital goods output has grown by 13.9 percent, compared to the contraction of 3.7 percent in the first quarter of 2013-14.
The mining sector grew by 4.3 percent in June as against a dip of 4.6 per a year ago. For April-June, the segment grew by 3.2 percent, compared to decline in production by 4.6 percent in the year-ago period.
Power generation increased by 15.7 percent in June as compared to flat output in the same month of 2013. In April- June, power output grew by 11.3 percent compared to a growth of 3.5 percent in the year-ago period.
As for the rise in rate of prices at the retail level, the CPI data revealed that food inflation during July rose to 9.36 percent, while it was at 7.97 percent in June.
Vegetables became costlier during the month, witnessing double digit price rise at 16.88 percent, from 8.73 percent in the previous month.
Similarly, fruit prices went up by 22.48 as against 20.64 percent in June. The rate of price rise in pulses was 5.85 percent.