Factory output growth slows, inflation eases Feb IIP growth at 7.13%, March CPI hits five-month low of 4.28%

India’s industrial production marginally declined in February to 7.1 per cent in February while the key retail inflation slipped to a five-month low of 4.28 per cent in March, official data showed on Thursday.

Index of Industrial Production (IIP) declined in February to 7.13 per cent from a rise of 7.39 per cent in January 2018 and a mere growth of 1.2 per cent in the corresponding period of last year.

The sequential slowdown in factory output was mainly on account of lower production in the mining sector. On a YoY basis, the manufacturing sector expanded by a healthy 8.7 per cent, while the mining sector's output dipped by (-) 0.3 per cent and the sub-index of electricity generation increased by 4.5 per cent.

The data disclosed that among the six use-based classification groups, the output of primary goods which has the highest weightage of 34.04 grew by 3.7 per cent. The output of intermediate goods which has the second highest weightage rose by 3.3 per cent. Similarly, consumer non-durables's output edged-higher.

In addition, infrastructure or construction goods' output increased by 12.6 per cent and that of capital goods by 20 per cent. "In terms of industries, fifteen out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of February 2018 as compared to the corresponding month of the previous year," said the CSO report on the "Quick Estimates" of Index of Industrial Production (IIP) for February.

Retail inflation based on the Consumer Prime Index (CPI) moderated in March due to easing food prices, including vegetables.

CSO data showed that retail inflation slipped to a five-month low 4.28 per cent in March. CPI, a key data factored in by the RBI to decide the interest rate, was 4.44 per cent in February.

However, the March 2018 inflation is higher than 3.89 per cent recorded in the same month last year. The earlier low at 3.58 per cent was recorded in October 2017. The Reserve Bank had maintained status quo on interest rate in its monetary policy earlier this month, citing inflationary concerns.

While the retail inflation is on the decline, it is still above the RBI's mid-term target of 4 per cent. The government has mandated the RBI to tame inflation at 4 per cent with a margin of 2 per cent on either side.

Inflation in the vegetables segment cooled to 11.7 per cent in March from 17.57 per cent in the previous month.

Reacting to the macroeconomic data, Commerce and Industry Minister Suresh Prabhu said in a tweet: "The IIP for the manufacturing sector in February 2018 stands at 130.1 which is 8.7 per cent higher than in Feb 2017 with fifteen out of the twenty three industry groups showing positive growth. Economic indicators continue to reflect the Indian growth story! IIP in February 2018 stands at 127.7, which is 7.1 percent higher as compared to the level in the month of February 2017."

Economic Affairs Secretary Subhash Chandra Garg tweeted: "Another very good IIP growth number came out today. For Feb 2018, IIP rose by 7.1 per cent. Manufacturing grew by 8.7 per cent marking fourth month of growth over 8.5 per cent. Capital goods grew by 20 per cent with last three months growth being over 15 per cent."