Easing inflation, marginal factory growth raise rate cut hopes

Retail inflation easing to a 25-month low of 8.1 per cent in February and a slight improvement in industrial growth have raised hopes for a rate cut by the Reserve Bank next month to boost economic activity.
Industrial output entered positive territory in January with a modest growth of 0.1 per cent after contracting for three months in a row.
Encouraged by the improvement in the price situation, India Inc stepped up its demand for a rate cut by the Reserve Bank in its monetary policy scheduled on April 1.
As per Consumer Price Index data released today by the Central Statistics Office, easing of onion and potato prices pulled the retail inflation rate lower in February.

Overall inflation in the food basket, including beverages, slowed to 8.57 per cent in February from 9.9 per cent in the previous month, according to the data.
"This should spur the RBI to give a predominance to growth and cut interest rates in its forthcoming monetary policy as the negative growth of capital and consumer goods, especially consumer durables, reinforces the view that escalating interest costs are impeding investment revival," CII Director General Chandrajit Banerjee said.

According to Index of Industrial Production (IIP) data, the marginal improvement in factory output was mainly on account of higher power generation and mining sector output, while manufacturing declined.

Prime Minister's Economic Advisory Council Chairman C Rangarajan said, "IIP data is in line with expectations. There is need for considerable pick up in February-March manufacturing activities."
During the 10-month period from April to January of this financial year, industrial output was flat compared with an over 1 per cent growth in the same period of 2012-13. In January 2013, factory output grew 2.5 per cent.
The contraction in IIP in December was revised to 0.16 per cent from the provisional estimate of a 0.6 per cent dip.