Industrial growth remains subdued at 2.4 per cent, retail inflation dips to 19-month low

Factory output as measured in terms of the Index of Industrial Production (IIP) had grown by 7.3 per cent in December 2017, according to the data released by the Central Statistics Office (CSO) on Tuesday.

The industrial growth for November 2018 was revised downwards to 0.3 per cent from the provisional estimate of 0.5 per cent released last month.

During April-December 2018-19, industrial output grew at 4.6  per cent against 3.7 per cent in the same period of the previous fiscal.

The manufacturing sector, which constitutes 77.63 per cent of the index, recorded a low growth of 2.7 per cent in December as against 8.7 per cent expansion in the year-ago month.

Mining sector production contracted by 1 per cent in December as against 1.2 per cent growth in December 2017. The growth of the power sector output remained flat at 4.4 per cent in December 2018.

Capital goods output grew at 5.9 per cent, compared to 13.2 per cent growth a year ago. Consumer durables output grew by 2.9 per cent as against a growth of 2.1 per cent in December 2017. Consumer non-durable goods growth was also low at 5.3 per cent in December 2018 as compared to 16.8 per cent growth in the year-ago month.

In terms of industries, 13 out of 23 industry groups in the manufacturing sector showed positive growth during December 2018.

As per use-based classification, primary goods production declined by 1.2 per cent and intermediate goods by 1.5 per cent. Infrastructure/ Construction Goods grew at 10.1 per cent.

Retail inflation fell to a 19-month low of 2.05 per cent in January due to fall in prices of food articles, mainly fruit and vegetables, coupled with easing of fuel cost, government data showed Tuesday.

The Consumer Price Index (CPI)-based retail inflation was revised downwards for the preceding month December to 2.11 per cent from the earlier estimate of 2.19 per cent, showed data from the Central Statistics Office (CSO).

In the year-ago month, January 2018, the retail inflation was at 5.07 per cent.

Fruits, vegetables and eggs continued to witness deflationary trend during January this year, with their prices declining 4.18 per cent, 13.32 per cent and 2.44 per cent, respectively, according to the CSO data released by the Ministry of Statistics and Programme Implementation (MoSPI).

The rate of price rise in the 'fuel and light' category was 2.20 per cent in January 2019, compared with 4.54 per cent in December 2018.

The overall food inflation during the latest month remained in the negative zone at (-)2.17 per cent. It was (-)2.51 per cent in December 2018.

"At 2.05 per cent, CPI for January is at 19-month low. Extended winter remains supportive of decelerating food prices. The fuel component, too, has surprised on the downside," said Shubhada Rao, chief economist, Yes Bank.

The previous low than the latest print of 2.05 per cent was back in June 2017, when retail inflation was at 1.46 per cent.

This, along with core inflation at 5.36 per cent, presents a scenario of CPI year-on-year growth between 2 per cent and 3 per cent in the next 5 months. This raises the probability of rate cuts in April and beyond, she said.

ICICI Bank Head of Global Markets Group B Pasanna said: "India's industrial production data for December was in line with expectations and confirms our belief that the November print was more an aberration."

The recovery in growth in consumer goods, especially non-durables, is encouraging.

"Our expectations for the next few months are also benign on headline CPI and, hence, we believe that there is a room for further accommodation in the next policy meeting," he said.