Industrial output picks up, retail inflation dips

Ease pressure on RBI to increase interest rates for now

Indicating economic revival, India’s industrial production grew by 7.1 per cent in December and inflation fell from 17month high to 5.07 percent in January easing pressure on RBI to increase interest rates.

The Index of Industrial Production (IIP) registered second consecutive month of high growth in December on the back of robust manufacturing activity which expanded by 8.4 per cent.

Within manufacturing, 16 out of 23 industry groups showed positive growth on an annual basis. IIP had grown by 8.8 per cent in November 2017.

“The industry seems to be shedding away the weight of GST-related glitches behind and trying to get back lost momentum, as both domestic and global growth surge. December growth showed not only a robust year on year growth but also a strong sequential improvement in the industrial activity,” said rating agency Crisil.

In December, the capital goods segment grew by 16.4 per cent against a contraction of 6.2 per cent in the same month last year. Infrastructure and construction goods grew by 6.7 per cent in December against 5.5 per cent in the same month in 2016. Consumer non-durables expanded by 16.5 per cent in December.

“No doubt two consecutive months of high single-digit industrial growth is encouraging. However, we believe it still early to read much from these numbers as these growth numbers have been calculated on a low base when industrial output had collapsed due to the impact of demonetisation,” said Sunil Kumar Sinha, principal economist, India Ratings and Research.

Inflation based on consumer price index marginally slowed to 5.07 per cent in January from 5.21 per cent in December, mildly pulling back the northward trajectory seen since July 2017. However, it still remained higher than the RBI’s base target value of four per cent.

A 30 basis points (bps) fall in food inflation, aided by a 0.6 per cent decline in fuel inflation, brought overall CPI inflation lower, said Crisil.

Food inflation in January fell to 4.7 per cent, from 4.96 per cent in December. Inflation in vegetables slowed to 26.97 per cent as against 29.13 in December.