Manufacturing contracts 0.7%; retail inflation cools to 8.1 %

Factory output grew for the first time in four months in January on the back of higher power generation and better production by the mining sector.

The index of industrial production (IIP) rose 0.1 per cent in January after contracting for three consecutive months. It had recorded 2.5 per cent growth in January 2013.

However, manufacturing, which constitutes over 75 per cent of the index, continued to be a picture of worry, contracting 0.7 per cent in January against a growth of 2.7 per cent in the same month last year.

Also, for December, the contraction in IIP has been revised to 0.2 per cent from 0.6 per cent. For April-January, factory output remained flat compared with 1 per cent growth in the corresponding year-ago period.

There was some good news on the retail inflation front, with Consumer Price Index-based inflation cooling to 8.1 per cent in February (8.79 per cent in the previous month). Both rural and urban retail inflation in February was lower than in January, official data released on Wednesday showed.

Even the better-than-expected inflation data for February 2014 is unlikely to set the stage for monetary easing immediately, said Aditi Nayar, Senior Economist at ICRA, a rating agency.

The marginally positive IIP growth for January 2014 does not provide much comfort, given that both capital goods and consumer durables have contracted for yet another month, she added. The Reserve Bank of India is to come out with its monetary policy review on April 1.

Industry view

CII Director-General Chandrajit Banerjee said factory output growth entering positive territory is a small consolation. The manufacturing sector continues to be in the red, indicating that the slowdown is yet to show any visible sign of bottoming out.

(This article was published on March 12, 2014)
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