IIP cheer: Au­gust fac­tory out­put re­bounds at 4.3%

Septem­ber re­tail in­fla­tion re­mains steady at 3.28% on un­ex­pected drop in food prices

The Hindu Business Line - - NEWS -

In­dus­trial out­put strength­ened in Au­gust 2017 to record ro­bust 4.3 per cent growth as re-stock­ing of man­u­fac­tured items gained mo­men­tum shrug­ging of the teething trou­bles posed by the GST im­ple­men­ta­tion from July 1.

A higher-than-ex­pected de­mand on ac­count of the fes­ti­val sea­son also bol­stered fac­tory out­put for the month un­der review, said econ­omy watch­ers.

Fac­tory out­put recorded a muted 0.9 per cent growth in July 2017, which was the first month after GST im­ple­men­ta­tion. The In­dex of In­dus­trial Pro­duc­tion (IIP) recorded 4 per cent growth in Au­gust last year.

Also, the over­all fac­tory out­put growth for Au­gust 2017 was buoyed by strong per­for­mance in min­ing and elec­tric­ity sec­tors. While min­ing in­dus­tries out­put grew 9.4 per cent (-4.3 per cent in Au­gust 2016), elec­tric­ity gen­er­a­tion grew cent (2.1 per cent).

How­ever, for the pe­riod AprilAu­gust 2017, fac­tory out­put grew at dis­ap­point­ing 2.2 per cent as com­pared to 5.9 per cent growth in same pe­riod last fis­cal.

CPI in­fla­tion steady

8.3 per

Se­quen­tial im­prove­ment

On an en­cour­ag­ing note, the se­quen­tial im­prove­ment in in­dus­trial growth in Au­gust 2017 was broad-based, led by all three sec­tors (min­ing, man­u­fac­tur­ing and elec­tric­ity) and five of the six use-based in­dus­tries (ex­cept in­fra­struc­ture/con­struc­tion goods). How­ever, 13 of the 23 sub-sec­tors of man­u­fac­tur­ing with a weight of 27 per cent in the IIP, recorded a con­trac­tion in Au­gust 2017. Mean­while, the Con­sumer Price In­dex (CPI) in­fla­tion for Septem­ber 2017 came in at 3.28 per cent, the same level as pre­vi­ous month. The lat­est print is lower than 4.39 per cent recorded in Septem­ber last year. It is also be­low the Re­serve Bank of In­dia’s medium tar­get of 4 per cent. Con­sumer food price In­dex (CFPI) in­fla­tion, which has a weigh­tage of about 40 per cent in over­all CPI, fell to 1.25 per cent in Septem­ber 2017 from a level of 1.52 per cent in the pre­vi­ous month. It was 3.96 per cent in Septem­ber 2016.

Aditi Na­yar, Vice-Pres­i­dent and Prin­ci­pal Econ­o­mist, ICRA, said that the CPI in­fla­tion mildly trailed es­ti­mates for Septem­ber 2017, on the back of the down­ward re­vi­sion in the print for Au­gust 2017, and an un­ex­pected eas­ing in food in­fla­tion.

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 well as fuel and light, and pan, tobacco and in­tox­i­cants, she said..

“Over­all, we ex­pect the CPI in­fla­tion to cross 4.0 per cent in the on­go­ing quar­ter and ex­ceed 4.5 per cent in March 2018,” she added.

In­dus­try en­thused

The re­bound in IIP is in­spir­ing after a slow­down in the months of June 2017 and July 2017 vis-àvis de­stock­ing and teething prob­lems of GST, said Gopal Ji­wara­jka, Pres­i­dent, PHD Cham­ber of Com­merce and In­dus­try (PHDCCI).

The uptick in cap­i­tal goods at 5.4 per cent in Au­gust 2017 in­di­cate that in­vest­ment ac­tiv­ity can re­vive in the com­ing months, he added.

How­ever, econ­omy watch­ers felt that this uptick in in­dus­trial growth may not sus­tain in Septem­ber 2017, with the early in­di­ca­tors for in­dus­trial pro­duc­tion in the or­gan­ised sec­tors, namely, au­to­mo­biles, coal and elec­tric­ity gen­er­a­tion, re­veal­ing some mod­er­a­tion in the pace of ex­pan­sion from the spikes recorded in Au­gust 2017.

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