Retail inflation at 25-mth low, IIP expands after four months

Last Updated: Thursday, March 13, 2014 - 08:54

New Delhi: Retail inflation easing to a 25-month low of 8.1 percent in February and a slight improvement in industrial growth have raised hopes for a rate cut by the Reserve Bank next month to boost economic activity.

Industrial output entered positive territory in January with a modest growth of 0.1 percent after contracting for three months in a row.

Encouraged by the improvement in the price situation, India Inc stepped up its demand for a rate cut by the Reserve Bank in its monetary policy scheduled on April 1.

As per Consumer Price Index data released today by the Central Statistics Office, easing of onion and potato prices pulled the retail inflation rate lower in February.

Overall inflation in the food basket, including beverages, slowed to 8.57 percent in February from 9.9 percent in the previous month, according to the data.

"This should spur the RBI to give a predominance to growth and cut interest rates in its forthcoming monetary policy as the negative growth of capital and consumer goods, especially consumer durables, reinforces the view that escalating interest costs are impeding investment revival," CII Director General Chandrajit Banerjee said.

According to Index of Industrial Production (IIP) data, the marginal improvement in factory output was mainly on account of higher power generation and mining sector output, while manufacturing declined.

Prime Minister's Economic Advisory Council Chairman C Rangarajan said, "IIP data is in line with expectations. There is need for considerable pick up in February-March manufacturing activities."

During the 10-month period from April to January of this financial year, industrial output was flat compared with an over 1 percent growth in the same period of 2012-13. In January 2013, factory output grew 2.5 percent.

The contraction in IIP in December was revised to 0.16 percent from the provisional estimate of a 0.6 percent dip.

PHD Chamber of Commerce and Industry President Sharad Jaipuria said, "Since WPI (wholesale price) inflation and CPI inflation are in the softening trend and subsiding month after month, RBI at this juncture should come forward to reduce the policy rates and help the industrial activity to recover at a faster pace."

According to the data, factory output started to decline in October with the IIP contracting 1.6 percent and continued till December.

Power generation posted a growth of 6.5 percent in January, compared with 6.4 percent in the same month of 2013. Expansion in power generation was 5.7 percent in April-January from 4.7 percent a year ago.

The mining sector, with a weight of about 14 percent in IIP, grew 0.7 percent in January as against a dip of 1.8 percent in the same month in 2013. During April-January, mining output shrank 1.5 percent as against a dip of 1.8 percent a year earlier.

The manufacturing sector, which constitutes over 75 percent of the index, declined 0.7 percent in January as against growth of 2.7 percent in the year-ago period. During April-January, the sector's output contracted 0.4 percent compared with 0.8 percent growth in the period last fiscal.

Overall, 11 of the 22 industry groups in manufacturing showed positive growth in January.

Consumer goods output declined 0.6 percent compared with growth of 2.5 percent a year earlier. During April-January, consumer goods output contracted 2.7 percent, compared with 2.7 percent growth in the corresponding period of 2012-13.

The consumer durables segment contracted 8.3 percent in January as against a decline of 0.7 percent previously. For the April-January period, the segment declined 12.5 percent compared with an expansion of 3.3 percent earlier.

In consumer non-durables, growth was 4.4 percent compared with 4.6 percent in January last year and for the April-January period, it was 5.6 percent versus 2.1 percent during the first 10 months of 2012-13.

Capital goods production, a barometer of demand, declined 4.2 percent compared with a contraction of 2.5 percent in the same month last year. The segment shrank 0.8 percent in April-January as against a sharp contraction of 9.4 percent in the comparable period.

The intermediate goods segment expanded at 3.4 percent in January compared with a growth of 3.5 percent a year earlier. During April-January, the segment grew 3 percent compared with 1.8 percent growth previously.

The basic goods segment grew 0.9 percent in January, lower than 3.7 percent in the same month last year, while for April-January, growth was 1.3 percent versus 2.8 percent in the year ago period.


First Published: Wednesday, March 12, 2014 - 21:30

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