NEW DELHI, MAY 12:
In a double
whammy of sorts for the government and the central bank, which have been
working to boost growth and keep prices under control, factory output slowed
once again in March, while retail inflation climbed up in April.
The Index of
Industrial Production (IIP) grew negligibly at 0.1 per cent in March, pulled
down by contraction in the mining and manufacturing sectors as well as a sharp
decline in output of capital goods.
IIP grew at
1.98 per cent in February after contracting for four straight months.
“The cumulative
growth for the period April to March 2015-16 over the corresponding period of
the previous year stands at 2.4 per cent,” said an official release on
Thursday. Worryingly, this is lower than the 2.8 per cent growth clocked in
2014-15.
Mining and
manufacturing sector output contracted by 0.1 per cent and 1.2 per cent,
respectively, in March. Electricity production, however, grew a robust 11.3 per
cent.
Capital goods
worry
More
worryingly, indicating a decline in investments, the production of capital
goods contracted further by 15.4 per cent in March from a contraction of 9.5
per cent in February. The output of basic goods and intermediate goods also
slowed down, but grew by 4 per cent and 3.7 per cent, respectively.
Consumer
durables and consumer non-durables grew 8.7 per cent and (-) 4.4 per cent,
respectively, with the overall growth in consumer goods at a mere 0.4 per cent.
Rate cut
clamour
The subdued
data is likely to increase calls for a rate cut by the Reserve Bank of India in
its second bi-monthly monetary policy review on June 7.
“There is worry
on both counts. IIP is much lower than expected in March and even on a
cumulative basis it is lower than that in 2014-15,” said DK Joshi, Chief
Economist, Crisil, adding that it is unlikely that the Reserve Bank of India
will cut rates in the next policy due to the higher inflation.
“It has gone up
over 5 per cent. The RBI is likely to watch the trend for a while before
lowering rates,” he said.
Retail
inflation for April jumped up to 5.39 per cent, against 4.83 per cent in March
2016. Consumer food price inflation shot up to 6.32 per cent from April, 2016
as prices of pulses and sugar rose. Consumer food price inflation was 5.21 per
cent in March 2016.
Economic
Affairs Secretary Shaktikanta Das, however, expressed hope that inflation will
remain stable in the coming months. “The base effect partly magnified the
retail inflation reading for April and some of it was due to sugar prices,” he
said, adding that the sugar sector will require long-term reforms.
CARE Ratings
said it needs to be seen whether a good monsoon will reinforce spending by
households and the infrastructure push by the government becomes stronger to
boost the IIP.
“Given the
monsoon forecast, the CPI inflation rate will not cross six per cent but will
continue to range between five per cent and six per cent for some time,” it
said.
(This article was
published on May 12, 2016
Regards, E.R.Iyer
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