Inflation falls to 4.4%, factory growth rises

Cheaper pulses keep inflation low; RBI may not hike rates

Central Statistics Office (CSO) on Monday said that retail inflation has fell to a four-month low of 4.44 per cent and industrial production has zoomed by 7.5 per cent — a double delight that could ease pressure on RBI for increasing interest rates.

Consumer food prices rose 3.26 per cent in February, compared with 4.70 per cent in January, as prices of pulses fell more than 17 per cent from a year earlier.

Inflation in vegetables was 17.57 per cent last month, down from 26.97 per cent in January), and for fruits it was 4.80 per cent (as against 6.24 per cent).

Fuel and light inflation stood at 6.8 per cent, compared with 7.58 per cent in January, while housing inflation stood at 8.28 per cent, from 8.33 per cent the previous month.

A lower inflation is considered to be an ideal situation for central bank to slash prices to aid industrial and commercial activity.

After this, analysts believe that Reserve Bank of India would hold rates steady during its review meet.

According to CSO data, Industrial production grew at 7.5 per cent in January 2018 against 3.5 per cent in the year-ago month on the back of good show by manufacturing coupled with higher offtake of consumer and capital goods.

The Index of Industrial Production (IIP) had grown at 7.1 per cent in December 2017.

The IIP growth in January this year was mainly on account of uptick in manufacturing sector which constitutes 77.63 per cent of the index. It grew by 8.7 per cent during the month as compared to 2.5 per cent in January 2017, showing signs of recovery in the economy.

Capital goods, a barometer of investments, showed a sharp increase in output by 14.6 per cent in January, 2018 as against a decline of 0.6 per cent year ago.

Consumer non-durable goods, which are mainly fast moving consumer goods, too showed an increase of 10.5 per cent as against a growth of 9.6 per cent. Consumer durable goods recorded a growth rate of 8 per cent in January 2018 against a contraction of 2 per cent a year ago. However, the mining sector saw a flat growth of 0.1 per cent compared to 8.6 per cent a year ago.

As per use-based classification, the growth rates in January 2018 over January 2017 are 5.8 per cent in primary goods, 4.9 per cent in intermediate goods and 6.8 per cent in infrastructure/ construction goods.

In terms of industries, 16 out of 23 industry groups in the manufacturing sector showed positive growth during January, 2018. IIP grew at 4.1 per cent in AprilJanuary this fiscal as compared to 5 per cent in same period in previous financial year.

The central bank expects retail inflation to pick up to 5.1 per cent to 5.6 per cent in AprilSeptember before easing, assuming normal rainfall.

Some economists feel that with annual economic growth climbing to 7.2 per cent in the OctoberDecember quarter, the RBI could resort to preemptive monetary tightening to cool prices.