Eco prospects improve as IIP grows 7.1 pc, inflation falls to 5-month low

Reflecting improvement in the economic situation, industrial production grew by a healthy 7.1 per cent in February while the key retail inflation slipped to a five-month low of 4.28 per cent in March, official data showed today.

The uptick in industrial production has been driven largely by the robust performance of the manufacturing sector coupled with higher offtake of capital goods and consumer durables.

Retail inflation based on the Consumer Prime Index (CPI) moderated in March due to easing food prices, including vegetables.

Both the set of data were released by the Central Statistics Office (CSO).

The Index of Industrial Production (IIP) had grown by 1.2 per cent in February 2017. It had recorded a growth of 8.54 per cent in November, 7.1 per cent in December and 7.4 per cent in January, as per the revised data.

 

However during April-February, IIP growth slowed to 4.3 per cent from 4.7 per cent in the same period last fiscal.

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.

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.

CSO data showed that retail inflation slipped to a five-month low 4.28 per cent in March. CPI, a key data factored in by the RBI to decide the interest rate, was 4.44 per cent in February.

However, the March 2018 inflation is higher than 3.89 per cent recorded in the same month last year.

The earlier low at 3.58 per cent was recorded in October 2017.

The Reserve Bank had maintained status quo on interest rate in its monetary policy earlier this month, citing inflationary concerns.

While the retail inflation is on the decline, it is still above the RBI's mid-term target of 4 per cent. The government has mandated the RBI to tame inflation at 4 per cent with a margin of 2 per cent on either side.

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 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.

Overall, inflation in the food basket stood at 2.81 per cent, lower than 3.26 per cent in February.

Reacting to the macroeconomic data, Commerce and Industry Minister Suresh Prabhu said in a tweet: "The IIP for the manufacturing sector in February 2018 stands at 130.1 which is 8.7 per cent higher than in Feb 2017 with fifteen out of the twenty three industry groups showing positive growth. Economic indicators continue to reflect the Indian growth story! IIP in February 2018 stands at 127.7, which is 7.1 percent higher as compared to the level in the month of February 2017."

Commenting on the IIP numbers, industry body Assocham said: "A smart growth in the capital goods along with manufacturing leading to 7.1 per cent industrial growth in February, 2018 signals revival in the business sentiment in terms of fresh investments."

Anis Chakravarty of Deloitte India said the downward growth movement of food inflation has had a larger than expected role to play in easing inflation prints and improved monsoon prospects are likely to keep food inflation concerns at bay, at least for some time to come.