Factory output grows 1.2% in May, retail inflation marginally up

| | Updated on: Jul 12, 2016
A worker welds steel at a factory in the industrial zone of Jurong in western Singapore  April 4, 2016. REUTERS/Edgar Su/File Photo

A worker welds steel at a factory in the industrial zone of Jurong in western Singapore April 4, 2016. REUTERS/Edgar Su/File Photo

IIP eps

IIP eps

Capital goods sector contracts sharply; pulses, sugar prices still high

The country’s factory output in May remained muted, strengthening calls for a rate cut by the Reserve Bank of India in its policy review next month.

The Index of Industrial Production (IIP) grew 1.2 per cent in May as against a contraction of 1.3 per cent in April. It had expanded by 2.5 per cent in May 2015.

Meanwhile, retail inflation which is outside the central bank’s comfort zone and at a 22-month high in June remained stable at 5.77 per cent. It was 5.76 per cent in May.

Analysts noted the deeper contraction in the revised IIP data for April, but said a rate cut is unlikely immediately. “The cumulative growth for the period April-May 2016 …stands at (-) 0.1 per cent,” said the data released on Tuesday.

Among the sectors, the sharpest growth in May was in electricity at 4.7 per cent, followed by mining at 1.3 per cent and manufacturing at 0.7 per cent. Raising concerns over the private investments, growth in capital goods contracted sharply by 12.4 per cent in May but was better than the contraction of 25 per cent in April. Growth in consumer durables was the highest at 6 per cent among the use-based classification of industries, while consumer non-durables declined by 2.2 per cent.

India Inc has been hoping for further reduction in key rates by the RBI, which had maintained the status quo in June but had hinted at a cut after good monsoons. The RBI’s next policy review is on August 9

Retail inflation Though retail inflation remained flat items including pulses, sugar and vegetables became more expensive and pushed up consumer food price inflation to 7.79 per cent in June as against 7.47 per cent in the previous month.

“The next CPI inflation is expected to remain elevated, before a combination of a favourable base effect, progress of monsoon and sowing and lower temperatures help to dampen food inflation. ICRA expects additional easing in 2016 to be limited to 25 basis points,” said Aditi Nayar, senior economist, ICRA.

Published on January 17, 2018

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