Dec IIP eases to -1.3%, Jan CPI rises to 5.69%

The IIP was -3.4% (revised) in November and CPI during the month of December was 5.61%; manufacturing falls by 2.4%

Industrial output fell for the second consecutive month, contracting by 1.3% in December, government data showed on Friday.

The Index of Industrial Production (IIP),  had contracted by 3.2% in November - the sharpest margin in the last four years. November IIP has been revised to -3.4%.

It had dipped for the first time in the last 13 months after registering a nearly 5-year high of 9.8% in October. Economists had warned then to treat it as a statistical aberration since the expansion was on a low base

Notwithstanding this contraction, the cumulative industrial growth for the period April-December 2015 over the corresponding period of the previous year stands at 3.1%. This is higher than 2.6% growth registered in 2014-15 over the same period.

The consumer price inflation edged up to a 17-month high of 5.69% in January, driven up by higher food costs, government data showed. It was 5.61% in December.

Retail food prices last month were up 6.85%, compared with 6.4% recorded in December.

The devastating floods in Chennai, which significantly affected automobile manufacturing sector, is considered by experts to be one of the causes of the dip in industrial production in December.

Among the sub-sectors manufacturin,g which constitutes roughly three-fourths of the index, fell by 2.4% in December after a contraction of 4.4% in November.

But over the entire April to December period in the current financial year, the sector has grown at 3.1%, up from 1.8% growth in 2014-15 over the same period.

Also, 12 out of the top 26 products within manufacturing showed negative growth.

"CPI numbers are as expected. I think this is now going to peak out and should remain in RBI's comfort zone through this year, helping RBI achieve next year's target levels as well," said Dharmakirti Joshi, chief economist, CRISIL.

"All leading indicators had suggested that IIP will remain in contracting zone, because we had witnessed sluggish growth in core industrial output, the impact of Chennai flood on manufacturing output, weak global demand impacting our exports and fall in vehicle sales across categories," Rupa Rege Nitsure, group chief economist, L&T Finance Holdings.