According to the Index of Industrial Production (IIP) data, manufacturing sector output shrank by 1.7 per cent in November 2020. Mining output also declined 7.3 per cent, while power generation grew 3.5 per cent.
The IIP had grown by 2.1 per cent in November 2019. Industrial production has been hit due to the COVID-19 pandemic since March last year when IIP contracted by 18.7 per cent in the month.
Rajani Sinha, Chief Economist & National Director, Research at Knight Frank India said: “The contraction in IIP for November is not surprising as the other high frequency economic indicators were also showing a moderation in growth.” She noted that a lot of economic revival seen in the previous few months had been because of pent-up demand and festive demand, hence the growth momentum was expected to moderate.
“With daily Covid infection rate reducing, vaccine round the corner and the economy close to normalcy, the critical aspect will be at what level the growth momentum stabilises,” Sinha added.
RBI may factor in retail inflation drop for rate cut
Meanwhile, retail inflation fell sharply to 4.59 per cent in December, mainly due to declining food prices, government data showed. Retail inflation based on the Consumer Price Index (CPI) was 6.93 per cent in November. Food inflation declined to 3.41 per cent in December in 2020, compared to 9.5 per cent in the previous month, according to the data released by the Ministry of Statistics and Programme Implementation. The ease in retail inflation for the second consecutive month is a major development as it may give an impetus for a rate cut in the next meeting of the Reserve Bank of India’s Monetary Policy Committee.