IIP rebounds, retail inflation slides to 6-month low

New Delhi: Industrial production grew at 2 percent in February after remaining negative for three months and retail inflation dropped to a 6-month low of 4.83 percent in March, reflecting some improvement in the economy and offering further scope to RBI to stay accommodative.

Worried over the slow pace of recovery, India Inc has pitched for government intervention as well as a lower interest rate regime to accelerate growth.

"Competitive interest rates are necessary for reviving investor sentiment which in turn would help put the economy back firmly on the growth trajectory. However, it is now the responsibility of banks to pass on benefits of rate cuts to the end-consumer," industry body Assocham said.

Although there is an uptick in the industrial output in February, the manufacturing sector, which constitutes over 75 percent of the index, crawled at 0.7 percent as against a growth of 5.1 percent in February 2015.

The uptick in industrial output was mainly on account of improvement in mining, power and consumer durables. Factory output measured in terms of the index of industrial production (IIP) declined 3.4 percent in November, 1.2 percent in December and 1.5 percent in January, data released by the Central Statistics Office (CSO) showed.

The index had registered a growth of 4.8 percent in February last year.

During April-February, industrial output grew at 2.6 percent compared with a growth of 2.8 percent in the year-ago period.

Mining too shaped up, logging a growth of 5 percent as against a growth of 1.6 percent in same month a year ago.

Power generation accelerated, growing 9.6 percent compared with 5.9 percent growth a year earlier.

The output of consumer durable goods grew 9.7 percent in February as against a contraction of 3.8 percent in the same month a year ago.

However, capital goods, a barometer for investment flow, contracted 9.8 percent in February compared with a growth of 8.3 percent in the year-ago period.

According to IIP data, as per use-based classification, basic goods reported a growth of 5.4 percent as against an expansion of 4.9 percent last year.

The overall consumer goods output grew at 0.8 percent from a growth of 4.9 percent a year ago.

The consumer non-durable segment contracted 4.2 percent in February as against a growth of 10.5 percent in the corresponding month.

In terms of industries, 16 out of the 22 industry groups in the manufacturing sector showed a positive growth in February.

Ficci said, "While there is an immense potential to grow for manufacturing, currently with the demand scenario not so optimistic, industry is cautious on any large scale expansion."

Retail inflation measured by the Consumer Price Index (CPI) in February was revised upwards to 5.26 percent from 5.18 percent.

Food inflation for March too softened to 5.21 percent. In February, food inflation was at 5.30 percent.

The rate of price rise in vegetables was at 0.54 percent, 4.85 percent (oils and fats) and 3.33 percent (milk and products) while fruit prices deflated further at (-)1.10 percent in March.

Pulses too turned cheaper as the inflation print came in at 34.15 percent during the month.

However, inflation in sugar and confectionery shot up to 3.92 percent in March (from 0.51 percent in February). And for pan, tobacco and intoxicants, inflation stood at 8.51 percent (over 8.39 percent).

Retail price rise of cereals and products rose to 2.43 percent and for meat and fish category, it moved up slightly with an inflation print of 7.74 percent.

Likewise, prices of eggs shot up further during the month, with inflation at 6.68 percent.

The inflation rate, based on CPI for rural areas, stood at 5.70 percent, while that for urban areas read 3.95 percent.