Retail inflation up 5.39%, IIP growth decelerates to 0.1%

In a double whammy to the economy, industrial output growth plunged to 0.1 per cent in March while retail inflation soared to 5.39 per cent in April, which may spoil the chances for any immediate rate cut by RBI.
The factory output growth decelerated mainly due to poor performance of manufacturing and mining sectors coupled with contraction in capital goods production, while higher food prices pushed the inflation higher, reversing the recent downward trend.
The retail inflation in March stood at 4.83 per cent, the lowest in six months. In April 2015, the rate of price rise was at 4.87 per cent.

Commenting on the surge in retail inflation, Economic Affairs Secretary Shaktikanta Das said, it is "subject to further analysis, perhaps some CPI inflation base effect also accounts for this. In any case overall core inflation is below 5 per cent and also overall number is also less than 5.5 per cent. It's within the target."
Food inflation rose to 6.32 per cent in April against 5.21 per cent in March, official data showed.
Factory output measured in terms of Index of Industrial Production (IIP) was 2.5 per cent in March last year, as per data released by Central Statistics Office (CSO) today.

The index had registered a growth of about 2 per cent in February this year.

For the entire 2015-16 fiscal, the factory output grew at 2.4 per cent, down from 2.8 per cent in the previous fiscal.
The manufacturing sector, which accounts for over 75 per cent of the index, declined by 1.2 per cent in March against a growth of 2.7 per cent in same month a year ago. The sector has not done well in 2015-16 as it grew by just 2 per cent compared to 2.3 per cent in previous year.
Mining sector output too contracted by 0.1 per cent in March compared to a growth of 1.2 a year ago. In 2015-16, the sector grew at 2.2 per cent up from 1.1 per cent in previous fiscal.

Capital goods segment, which is a barometer of investment, contracted by 15.4 per cent in March as against a growth of 9.1 per cent year ago. During 2014-15, the output of these goods also declined by 2.9 per cent compared to a growth of 6.3 per cent in previous fiscal.
According to data, IIP growth for June was revised
downwards to 1.95 per cent, from a provisional estimate of 2.1 per cent released last month.
Referring to IIP numbers, Das said, "It is certainly a matter of concern, but let us also remember that the IIP data is a sample of 400 companies. So, they are not truly reflective of the state of affairs... The numbers which are in the negative zone... Do not reflect the full picture."

The official IIP data released today showed that the manufacturing sector, which constitutes over 75 per cent of the IIP index, declined by 3.4 per cent in July compared with 4.8 per cent growth a year ago.
In terms of industries, 12 out of 22 industry groups in the manufacturing sector showed negative growth in July.
The capital goods output registered a steep decline of 29.6 per cent in the month against a growth of 10.1 per cent last year.
Power generation recorded a growth of 1.6 per cent in July as against 3.5 per cent in the same month a year ago.

The mining sector grew 0.8 per cent in July against a growth of 1.3 per cent a year ago.
Growth in output of consumer durables decelerated to 5.9 per cent in July, from 10.5 per cent a year ago. The consumer non-durable goods output declined by 1.7 per cent in July against 4.4 per cent contraction a year before.
Overall, consumer goods production recorded a growth 1.3 per cent in July compared with 1.1 per cent a year ago.
As per use-based classification, the growth rates in July 2016 are 2 per cent in basic goods and 3.4 per cent in intermediate goods over July 2015.

For April-July, manufacturing sector's output showed contraction by 1.4 per cent as against a growth of 4 per cent a year ago.
Production of capital goods, which are considered as a barometer for investment, declined 21.3 per cent in the four-month period compared with a growth of 4.2 per cent in year-earlier period.