Factory output down for second month

Some cheer on trade deficit and marginal relief on rate of rise in prices

Macro economic data released on Monday showed the Index of Industrial Production (IIP) declined but there was some relief on the trade deficit and retail inflation numbers.

With all eyes on gross domestic product (GDP) data for the financial year's first quarter (April-June), its one-fifth part - industrial production - contracted for a second month in a row, by 2.2 per cent in June against a two per cent decline in the same month of the previous financial year.

With this, the IIP has fallen by 1.1 per cent in the first quarter, compared to a fall of 0.2 per cent in the corresponding period of 2012-13, official data showed on Monday.

GDP data for the first quarter is expected by the end of this month.

Trade data provided a bit of respite. Exports rose 11.6 per cent to $25.8 billion, a 21-month high (after a 23.7 per cent rise in October 2011), against $23.1 bn in the corresponding period of the previous year. The rise in July exports was mainly on account of a falling rupee, coupled with a rise in demand in the US, Africa and the Far East.

July imports reached $38.1 bn, down 6.2 per cent from $40.6 bn in July last year. It was brought down by a decline in oil and gold imports. The trade deficit in July was $12.3 bn, a 30 per cent fall from $17.5 bn in July last year.

Consumer Price Index-based inflation declined but remained elevated at 9.64 per cent in July, from 9.87 per cent in the previous month.

For the first four months of the current financial year, exports were higher by 1.7 per cent at $98.3 bn, against $96.6 bn in the corresponding period of last year. Imports were up 2.8 per cent at $160.7 bn, against $156.3 bn in the same period last year. During April-July, the trade deficit widened to $62.45 bn, against $59.7 bn in the corresponding period of the previous financial year.

Economists are certain that the first quarter GDP growth will not be much, given the lacklustre industrial production. "Our forecast is below five per cent for the first quarter," CRISIL chief economist D K Joshi said. The economy had grown 5.4 per cent in the first quarter of 2012-13, the fastest in that year. GDP rose by a decadal-low of five per cent in 2012-13.

However, the July export figure gives some hope to the IIP. If foreign demand picks up, there would be boost for industrial growth as well.

The decline in CPI-based inflation was not uniform across the country. Urban areas witnessed an increase and rural areas a fall in the rate of price rise, official data showed. It rose to 10.26 per cent in July from 10.16 per cent in June in urban areas and declined to 9.14 per cent in villages from 9.63 per cent.