 "March CPI eases to six-month low of 4.83%; Feb IIP rebounds to 2%")
Inflation was at 5.25 per cent in March 2015. Retail inflation is now trending below the RBI’s CPI target of 5 per cent by the end of the current financial year. Food inflation, the biggest component of CPI, also eased to 5.21 per cent in March, down from 5.3 per cent in February.The food index, which accounts for over 45 per cent of CPI had edged up to 6.14 per cent in March 2015. Within the food category, the pulses category registered the sharpest rise at 34.15 per cent. It was the only category that saw double digit inflation.
Read more from our special coverage on "CPI"
Inflation eased in both rural and urban areas. In urban areas CPI declined to 3.95 per cent in March from 4.3 per cent in February. The corresponding figures for rural areas were 6.05 per cent and 5.7 per cent respectively.
In its recent monetary policy review the central bank had cut interest rates by 25 basis points. But with inflation easing further, the clamour for another 25 basis points cut is only going to get louder.
The annualised core consumer inflation, which excludes energy and food prices, was estimated to have eased to around 4.6-4.8 per cent in March from 5-5.3 per cent in February.
The Index of Industrial Production (IIP) was boosted mainly by a 9.6 per cent rise in electricity generation and a 5 per cent rise in mining output. The cumulative industrial growth for the period April-February period of the last financial year (2015-16) over the corresponding period of the previous year stands at 2.6 per cent, slightly lesser than the 2.8 per cent growth registered for the same period in the previous year.
However, manufacturing which constitutes roughly three-fourths of the index showed marginal growth of 0.7 per cent in February. It cumulatively grew by 2.3 per cent in the April-Feb, same as the previous year.
"CPI is better than expected with across-the-segment improvement. However, the biggest surprise was from month-on-month fall in fuel inflation versus our expectation of a rise. Overall, we are retaining our expectation of another 25 basis point rate cut by the RBI going ahead on the back of easing inflation. The risk going ahead could come from commodities, but with the forecast of normal monsoon, inflation worries are expected to be containe," said Anjali Verma, economist, PhillipCapital India.
"Momentum is looking lower. The core inflation is lower with 24 bps month-on-month decline. Although we expect some of the food price momentum to pick up in coming 2-3 months, outlook for monsoon being favourable should be adequate to offset interim price pressure on food. Overall inflation trajectory appears to be well within RBI's indicative target for March, and as such, we expect a 25 bps rate cut as early as June.
If food inflation surprises on a significant downside on RBI's target by 50 bps by March, further rate cuts cannot be ruled out," said Shubhada Rao, chief economist, YES Bank.
A recent report by the United Nations Industrial Development Organization (UNIDO), released earlier this month, placed India sixth among the world's 10 largest manufacturing countries, up from the 9th rank. It found that India's Manufacturing Value Added (MVA) grew by 7.6% in 2015 compared to the previous year.
The report stated that IIP showed a quarterly growth of 1% in manufacturing output in the fourth quarter of 2015 compared to the same period of previous year
In February, 19 out of the top 25 products within manufacturing showed growth, up from 18 last month.
Electricity, which rose by 6.6%, has seen a steady rise since November. However, cumulative growth of 5.1% in the April-February period falls far behind that of the previous year which was 9.1%.
On the other hand, mining also picked up, growing 5% up from the 1.3% in January.
"The February mildly overshot our expectations (0.9%), breaking the spell of contraction in industrial output for three consecutive months and shrugging off concerns related to loss of mandays following disruption in parts of Haryana in that month," Aditi Nayar, Senior Economist from ICRA said.
Among product categories, Office, accounting & computing machinery registered the highest growth at 37.9%, followed by Furniture at 27.9%. Electrical machinery & apparatus on the other hand, continued to fall by the largest margin at 47.1%.
Cable, Rubber Insulated, and Stainless/ Allow steel and apparels contributed the most to the contraction in the index. Of these, Cable, Rubber Insulated and Stainless/ alloy steel has figured in the list for the past few months.
On the other hand, electricity, minerals and gems and jewellery were the highest positive contributors to growth.
On the use based classification, capital goods, considered a proxy of investment demand, continued to contract sharply, going down by 9.8% after a 20.4% slide in the preceding month. This contraction has consistently acted as the big drag on the performance of the IIP Index.
On the demand side, consumer non durables also declined by 4.2% from 3.1% in the previous month. The IMD's forecast of an above-normal monsoon has boosted the outlook for rural demand, which should help arrest the sustained contraction in consumer non-durables over the coming months, Nayar said.
Growth in consumer durables however increased by 9.7% after growing by 5.8% in January.