Two major data points released on Thursday — factory output for January and retail inflation for February — present a mixed picture of the economy, complicating things for Reserve Bank of India Governor Raghuram Rajan ahead of the April 7 monetary policy review.

Retail inflation, as measured by a new consumer price index, rose to a four-month high of 5.37 per cent in February, largely due to a spike in the prices of vegetables and pulses, official data showed.

Citing slowing inflation, the RBI Governor had last week made an unscheduled interest rate cut, the second this year.

CPI-based inflation was at 5.19 per cent in January 2014 and 7.88 per cent the following month.

However, there was positive news on the industrial output front with the print for January 2015 at 2.6 per cent, higher than the 1.1 per cent growth in the same month last year.

Capital goods to the fore A spurt in the volatile capital goods segment, which recorded a higher-than-expected 12.8 per cent, drove the growth in overall factory output. However, consumer durables continued to be a picture of worry, reflecting tepid consumer demand.

While mining output contracted in January this year at 2.8 per cent (against 2.7 per cent growth), electricity generation grew much slower than expected at 2.7 per cent (6.5 per cent).

Factory output growth for December 2014 has now been revised upwards to 3.23 per cent from 1.7 per cent earlier.

The mixed signals arising from the two data points — factory output and retail inflation — may now reduce the chances of the RBI going in for another rate cut in the policy review next month, say economy watchers.

Industry happy Confederation of Indian Industry (CII) Director General Chandrajit Banerjee said the uptick in industrial output is a “happy augury”, which would set the pace for further growth during the course of the year.

The “marginal uptick” in CPI inflation over the previous month should not dissuade the RBI from continuing with its rate easing cycle to support growth in the forthcoming monetary policy announcement in April, Banerjee said.

This should be the stance especially when the performance of consumer durables continues to remain muted and inflation is within the comfort zone of the RBI, he said.

Assocham President Rana Kapoor said the IIP numbers are encouraging. He said the recent initiatives taken by the Centre and rate cuts announced in the monetary policy have impacted the manufacturing sector positively as it has registered a better growth rate of 3.3 per cent compared with the 0.3 percent seen in January 2014.

FICCI Director-General Arbind Prasad also said it was encouraging to see positive growth in the manufacturing sector over the last three months.

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