Inflation slows, India's output up

New Delhi: India’s industrial output grew at 7.1 per cent in February due to robust performance of the manufacturing sector. This has brighten the outlook for GVA growth for the fourth quarter of FY18. 

Moreover, India’s retail inflation eased to a five-month low in March to 4.28 per cent from 4.44 per cent in February but remained above RBI’s medium-term target. It means that RBI is likely to maintain status quo on the monetary policy in the next review in early June.

“Encouraging growth-inflation mix is on hand, as inflation moderated, whilst production numbers rang in another good month, helped also by base effects when the demonetisation impact had depressed prices and economic activity," said  Radhika Rao, India economist, DBS Bank. Industrial output in February is lower than 7.4 per cent growth witnessed in January. 

“While IIP growth charted an expected dip in February 2018 relative to the previous month, the pace of expansion was modestly higher than anticipated. With IIP growth exceeding 7 per cent for January-February 2018, the outlook for the GVA growth for Q4 FY18 has become brighter,” said Aditi Nayar, principal economist at ICRA. 

She said that growth in February 2018 was primarily driven by the manufacturing sector, although the use-based classification presents a fairly broad-based growth driven by capital goods, infrastructure goods as well as consumer goods. 
“Industrial growth may dip below 7 per cent in March 2018 after a gap of four months,” added Ms. Nayar. 

Manufacturing sector, which constitutes over 77 per cent of the index, grew at 8.7 per cent in February as compared to almost flat growth of 0.7 per cent in the same month a year ago.  Capital goods output rose by a robust 20 per cent in the month under review as against a contraction of 2.4 per cent earlier. 

Consumer durables too grew at 7.9 per cent as against a contraction of 4.6 per cent in February 2017. Electricity generation also grew  by 4.5 per cent compared to 1.2 per cent. However, mining output declined by 0.3 per cent against a growth 4.6 per cent earlier. Consumer non-durables sector recorded a growth of 7.4 per cent.

As per Central Statistics Office (CSO),  inflation in the vegetables segment cooled to 11.7 per cent in March from 17.57 per cent in the previous month. The rate of price rise in the protein rich items like eggs, milk and other products too moderated in March as against the previous month. 

Inflation in fruits basket was higher. Overall, inflation in the food basket was 2.81 per cent, lower than 3.26 per cent in February. However, the core inflation rose to a 43-month high 5.4 per cent in March 2018, driven by miscellaneous items and pan, tobacco and intoxicants.