In­fla­tion, IIP num­bers give govt sigh of re­lief

Financial Chronicle - - FRONT PAGE -

THE lat­est eco­nomic num­bers come as a breath of fresh air to the Modi gov­ern­ment bat­tling slow­down. Re­tail in­fla­tion came in at 3.28 per cent in Septem­ber, lit­tle changed from Au­gust, while in­dus­trial pro­duc­tion grew to a nine-month high of 4.3 per cent in Au­gust.

One of the rea­sons for stable in­fla­tion is mod­er­a­tion of food in­fla­tion to 1.25 per cent in Septem­ber from 1.67 per cent in the pre­vi­ous month. Higher food prices were the main rea­son for spike in con­sumer price based in­fla­tion (re­tail in­fla­tion) in pre­vi­ous months. Veg­eta­bles soft­ened to 3.92 per cent in Septem­ber from 9.97 per cent in Au­gust. Pulses con­tin­ued with de­fla­tion­ary trend at (-) 22.51 per cent and eggs prices dropped 0.15 per cent.

The in­fla­tion rose in the fuel to 5.56 per cent from 3.66 per cent in Au­gust. In­fla­tion in fruits, meat & fish, and pre­pared meals also in­creased, data show.

Com­pared to Au­gust num­bers, a sig­nif­i­cant price de­cline in the food and bev­er­ages cat­e­gory com­pen­sated for the price in­crease in other com­po­nents, said Soumya Kanti Ghosh, chief eco­nomic ad­viser of the SBI group.

“Within food in­fla­tion, a de­crease in price of veg­eta­bles, ce­re­als and fruits has con­trib­uted to the de­cline. We ex­pect CPI in­fla­tion to re­main sub-4 per cent till De­cem­ber 17 and re­main sub-4.5 per cent there­after this fis­cal,” he said.

Com­ment­ing on the im­pact of state-wise Jan Dhan ac­counts on CPI in­fla­tion, he said, “States where more num­ber of Jan Dhan ac­counts are opened, the ru­ral in­fla­tion is at a lower level. For­mal­i­sa­tion of econ­omy has hap­pened. There is both sta­tis­ti­cally sig­nif­i­cant and eco­nom­i­cally mean­ing­ful drop in con­sump­tion of in­tox­i­cants such as al­co­hol and tobacco prod­ucts in states where more Jan Dhan ac­counts have been opened.”

Jan Dhan-Aad­haarMo­bile (JAM) trin­ity has helped in bet­ter chan­nelis­ing of gov­ern­ment sub­si­dies and helped in curb­ing the un­pro­duc­tive ex­pen­di­ture such as al­co­hol and tobacco ex­penses in ru­ral ar­eas, he said.

Aditi Na­yar, prin­ci­pal econ­o­mist at ICRA, said the mild eas­ing in food in­fla­tion in Septem­ber 2017 rel­a­tive to the pre­vi­ous month, was off­set by the con­sid­er­able rise in in­fla­tion for hous­ing, on the back of the HRA re­vi­sion.

As a re­sult of the uptick in in­fla­tion for hous­ing, and pan, tobacco and in­tox­i­cants, core in­fla­tion rose to 4.6 per cent in Septem­ber 2017 from 4.5 per cent in the pre­vi­ous month.

The other piece of good news is fac­tory out­put. The gov­ern­ment data showed that the in­dus­trial pro­duc­tion grew in Au­gust mainly on ac­count of ro­bust per­for­mance of min­ing and power sec­tors, cou­pled with higher cap­i­tal goods pro­duc­tion. Fac­tory out­put growth mea­sured in terms of In­dex of In­dus­trial Pro­duc­tion (IIP) was 4 per cent in Au­gust 2016.

The pre­vi­ous high in IIP growth was recorded at 5.7 per cent in Novem­ber 2016. IIP growth dur­ing April-Au­gust pe­riod of this fis­cal stood at 2.2 per cent, down from 5.9 per cent in the same pe­riod in 201617.

The July IIP num­ber has also been re­vised to 0.94 per cent from 1.2 per cent pro­vi­sional es­ti­mates re­leased last month.

The out­put growth in man­u­fac­tur­ing sec­tor, which con­sti­tutes 77.63 per cent of the in­dex, how­ever, de­cel­er­ated to 3.1 per cent in Au­gust from 5.5 per cent a year ago.

The out­put of the min­ing and elec­tric­ity sec­tors grew at 9.4 per cent and 8.3 per cent.

The con­sumer durables and con­sumer non­durables sec­tors recorded growth of 1.6 per cent and 6.9 per cent, re­spec­tively. In terms of in­dus­tries, 10 out of 23 in­dus­try groups in the man­u­fac­tur­ing sec­tor have shown a pos­i­tive growth dur­ing Au­gust 2017.

The in­dus­try group 'Man­u­fac­ture of com­puter, elec­tronic and op­ti­cal prod­ucts' showed the high­est pos­i­tive growth of 24.9 per­cent, fol­lowed by 16.5 per cent in phar­ma­ceu­ti­cals, medic­i­nal chem­i­cal and botan­i­cal prod­ucts.

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