IIP contracts 1.2% in Feb; retail inflation moves up

Industrial output contracted by 1.2 per cent in February while the retail inflation rose to 3.81 per cent in March, prompting the industry to pitch for more reforms to deal with economic woes.
The industrial output, according to data released today, slipped to a 4-month low contracting by 1.2 per cent in February because of decline in the manufacturing sector and lower offtake of capital as well as consumer goods.
The Index of Industrial Production (IIP) had registered a growth of 1.99 per cent in February last year.
Also, the consumer price index-based inflation rose to a 5-month high of 3.81 per cent in March against 3.65 per cent in February.

Commenting on IIP data, FICCI president Pankaj Patel said: "The fall in the manufacturing sector ... Indicates that the growth remains fragile in manufacturing and need continued efforts to make the sector competitive.
"The government should continue its reform measures and deepen it in times to come to strengthen the manufacturing sector."

The decline in the IIP in February is mainly due to 2 per cent contraction in manufacturing, which constitutes over 75 per cent of the index. The sector had recorded a meagre growth of 0.6 per cent in February, 2016.
The capital goods output declined by 3.4 per cent during the month over a contraction of 9.3 per cent last year.

Likewise, the overall consumer goods production declined by 5.6 per cent in the month against 0.6 per cent growth in year-ago period.
The non-durable consumer goods output shrank by 8.6 per cent in February over a contraction of 4.9 per cent year ago. In the consumer-durable segment, the output dipped by 0.9 per cent in February against a growth of 10.4 per cent in same month last year.
Retail inflation for March was a little elevated against February's 3.65 per cent.
Even though, the rate of price rise for overall food category was lower at 1.93 per cent than 2.01 per cent recorded in February.

Protein rich items such as milk & products and eggs were costlier during the month with inflation prints of 4.69 per cent and 3.21 per cent respectively.
Vegetable prices continued to show deflationary trend at an inflation print of (-)7.24 per cent in March against (-)8.29 per cent in previous month.
The rate of price rise in fuel and light was at 5.56 per cent. For milk & products and eggs, prices were up by 4.69 per cent and 3.21 per cent respectively.
Prices of prepared meals, snacks and sweets grew by 5.65 per cent.
"The CPI reading for March 2017 is a positive surprise... the trajectory that the RBI has indicated, builds in an upturn in inflation from first half to second half, which suggests a high likelihood of a prolonged pause for the policy rate," ratings firm ICRA stated.

SBI's economic research department suggested that CPI inflation is unlikely to breach the 4 per cent mark till July.
"If this is so, the RBI inflation forecast of 4-4.5 per cent will be materially undershot," it added.