Comments
Industrial output growth slowed to a four-month low in July, underscoring the economy’s struggle to make a sustained recovery from its longest stretch of below-par growth in decades. But inflation data offered some cheer.
Factory output data for July 2014, released on Friday, were disappointing, with growth pegged at a modest 0.5 per cent — the lowest this fiscal — against the revised growth level of 3.9 per cent in June.
The IIP performance was weighed down by a contraction in manufacturing, which continues to be a pain point for policymakers, and a fall in growth rates in both electricity generation and mining. India Inc felt the muted industry growth — on the back of negative growth in manufacturing — indicated that a full-fledged recovery was still some distance away though anecdotal evidence suggests some pick up in new orders.
A sustained recovery would be indicated by an improvement in the offtake of commercial credit by industry, said Confederation of Indian Industry Director-General Chandrajit Banerjee, adding that the Government was receptive to industry concerns and industry sentiments were strong.
However, stock markets are expected to shrug off this disappointing factory output data when they open on Monday given the general optimism among investors that the Narendra Modi-led Government will take efforts to cut red tape and revive stalled projects.
Anis Chakravarty, Senior Director for Deloitte in India, said the July IIP numbers showed that mining and electricity were largely in line with expectations though manufacturing again disappointed.
“It is important that the focus on manufacturing is intensified if industry numbers are to pick up. There are risks that electricity numbers will suffer in the coming months which can bring IIP down.”
Price cheer The disappointment on the industry front was to some extent eased by retail inflation, measured by the consumer price index (CPI), staying under 8 per cent for the third consecutive month in August, at 7.80 per cent. This is lower than 7.96 per cent in July, helped mainly by slower annual increases in the prices of fuel, light and clothes.
Pressure on food still remains with the overall food inflation inching up to 9.42 per cent (9.36 per cent), despite some softening in vegetable price inflation.
The latest retail inflation print has raised hopes that the RBI will be able to keep consumer price based inflation within its 8 per cent goal by January 2015.
Together, the two indices — retail inflation for August and factory output for July — showed mixed signals and indicated that the RBI will keep policy rates unchanged at its review meeting on September 30, say economy watchers.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.