Index of Industrial Production slows, inflation rises

New Delhi: It was a double whammy for the ecnomy with industrial production slowing down in June and retail inflation moving up in July. Retail inflation, based on consumer price index (CPI), rose to 7.96 per cent in July from 7.46 per cent in June, due to price rise in food articles, including vegetables, fruits, and pulses.

Industrial (IIP) growth slowed to 3.4 per cent in June after growing at 5 per cent in May. However the good factor is that industrial production remained in the positive territory for the third month in a row.  Industrial production was pulled down by consumer goods which contracted by 10 per cent with consumer durables falling by 23 per cent.  

ICRA, senior economist, Aditi Nayar, said that the sharp contraction in consumer durables output in June 2014 was partly on account of buyers refraining from big ticket purchases with a weak start to the monsoon season dampening consumer confidence.

“The weaker-than-expected IIP growth print for June 2014 in spite of  the sharp pickup in core sector data and healthy exports growth highlights that the recovery in the domestic growth momentum is yet to become broad-based,” she said.

Crisil said that retail inflation is now back at the Reserve Bank of India’s target of 8 per cent for January 2015.

“While the upside risks to vegetable and fruit prices persist, the strong base effect and proactive measures taken by the government to control food inflation should cap any sharp increases in inflation at least until December,” it said. The rating agency said that upside risks to inflation from a sub-normal monsoon too have moderated.

Food inflation in July this year rose to 9.36 per cent as against 7.97 per cent in June. Vegetables were costlier in July with a double-digit price rise of 16.88 per cent, a steep rise from 8.73 per cent in June.