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Factory output shrinking for the second month in a row, contracting 0.5 per cent in March, and retail inflation surging to a three-month high of 8.59 per cent in April sent out alarm signals for the new government
The IIP contracted at a slower pace thanks to a better-than-anticipated manufacturing performance. The index of industrial production (IIP) had contracted by 1.8 per cent in February. The manufacturing sector shrank 1.2 per cent against 3.7 per cent last month.
The IIP for February stood revised to a contraction of 1.8 per cent from 1.9 per cent earlier, according to official data released on Monday. The overall IIP data for 2013-14 shrank 0.1 per cent against an expansion of 1.1 per cent last year.
A positive feature of the IIP data is the strong performance of consumer non-durables output, which grew 7.2 per cent (-1.2 per cent). While capital goods output contracted 12.5 per cent (-17.4 per cent), electricity sector grew 5.4 per cent (11.5 per cent). The mining sector contracted 0.4 per cent in March against a growth of 1.4 per cent last month.
Inflation rises Retail inflation for April was at a three-month high of 8.59 per cent, higher than 8.31 per cent last month, largely due to rising food inflation at 9.66 per cent (9.1 per cent).
Rural inflation stood at 9.25 per cent (8.89 per cent), while urban inflation was seen at 7.69 per cent (7.51 per cent).
Core inflation data for April remained unchanged at 7.8 per cent.
Most economists now expect the Reserve Bank of India to hold policy rates on June 3 to evaluate the outcome of El Nino and whether that would result in a drought. The El Nino outcome could impact the expectations on food items prices.
The significant shrinkage in the production of capital goods and consumer durables shows that industrial revival is going to be one of the major challenges for the new government, industry body Assocham said in a statement. There is a need to reduce the investment allowance eligibility limit to ₹1 crore from the existing ₹100 crore, it added.
The Confederation of Indian Industry said the weak industrial scene should propel the new government to send out strong signals that it is committed to growth.
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