February IIP contracts 3.6%; retail inflation rises to 5.5% in March

The manufacturing sector output contraced by 3.7 per cent in February, while the mining output declined by 5.5 per cent. Meanwhile, the power generation grew by 0.1 per cent

Economic data released on Monday showed that the restrictions and sporadic lockdowns in response to the fresh wave of coronavirus infections started impacting the overall demand and growth.

The Index of Industrial Production (IIP) contracted 3.6 per cent for February 2021, mainly on account of a steep contraction in the manufacturing output, showed data released by the Ministry of Statistics and Programme Implementation (MoSPI).

The factory output had contracted by 1.6 per cent in the previous month (January 2021) and expanded to 4.5 per cent in February 2020.

The manufacturing sector output contraced by 3.7 per cent in February, while the mining output declined by 5.5 per cent. Power generation grew by 0.1 per cent in February.

Meanwhile, India's retail inflation rose to a four-month high of 5.52 per cent in March as food prices soared. The consumer price index (CPI)-based inflation was 5.03 per cent in the previous month (February 2021) and was 5.91 per cent in the same month last year (March 2020).

Food inflation accelerated to 4.94 percent in March, as compared to 3.87 percent in February.

Within the food items, the rate of fall in vegetables prices was at 4.83 per cent in March, as against 6.27 per cent in the previous month. Meanwhile, the inflation rate in Food and beverages was very high at 5.24 per cent.

Inflation in 'fuel and light' category remained elevated at 4.50 per cent during March compared to 3.53 per cent in February.

Earlier this month, Reserve Bank of India (RBI) had projected the retail inflation at 5 per cent in the January-March quarter of 2020-21 and 5.2 per cent in the first two quarters of the current financial year.

After breaching the upper tolerance threshold of 6 per cent for six consecutive months (June-November 2020), CPI inflation fell in December 2020 and eased further in January 2021 to 4.1 per cent on the back of a sharp correction in vegetable prices and softening of cereal prices.

The union government kept the inflation target of the monetary policy framework unchanged at 2-6 per cent for the next five years, until the financial year 2025-26.

The Central bank kept the rates unchanged at 4 per cent in its latest monetary policy and the stance accommodative amid concerns that rising coronavirus cases could derail the nascent recovery.