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Inflation at 3-month high, IIP dips for second month

The new government coming into power after 16 May would never be pleased while looking at these abysmal economic numbers.  While costlier vegetables,  fruits and milk pushed up retail inflation to three-month high of 8.59 per cent in April, squeezing the space for the Reserve Bank to ease interest rates in the monetary policy review in June, industrial production remained in negative zone for the second month in a row in March. IIP data contracted 0.5 per cent due to  bottomless performance by manufacturing, especially capital goods.

Output remained almost flat in 2013-14 and declined 0.1 per cent compared with an expansion of 1.1 per cent in 2012-13. The IIP showed growth of 3.5 per cent in March 2013.

The retail inflation, measured on consumer price index (CPI), was 8.31 per cent in March.As per the data released by the government, food inflation increased to 9.66 per cent against 9.1 per cent in March.Vegetables were costlier by 17.5 per cent in April as against 16.8 per cent in the previous month. The rate of price rise in fruits was 21.73 per cent as against 17.19 per cent in March.

Inflation in milk was 11.42 per cent in April as against 11.02 per cent in the previous month.
Meanwhile, Amul and Mother Dairy, the two major milk suppliers in Delhi have increased prices by Rs 2 a litre.
The price rise in protein-rich items like egg, meat and fish was 9.41 per cent, while cereals and pulses became costlier by 9.67 per cent and 5.05 per cent respectively.

Amid industry clamouring for cut in interest rate, the Reserve Bank had chosen to keep the policy rate (repo) unchanged at 8 per cent in its April monetary policy review as retail inflation was ‘sticky’.
The RBI is scheduled to announce its next monetary policy review on June 1.
As per the data, the corresponding provisional inflation rates for rural and urban areas for April 2014 are 9.25 per cent and 7.69 per cent, respectively.

The government will release inflation based on wholesale price index (WPI) on 14 May.Meanwhile, IIP data for February was revised to a contraction of 1.8 per cent as against a dip of 1.9 per cent, according to information released by the Central Statistics Office (CSO).

Factory output started to decline in October, when the IIP contracted 1.2 per cent, and continued till December. It entered the positive zone in January and slipped into negative territory again in February.

Manufacturing, which constitutes over 75 per cent of the index, declined 1.2 per cent in March against growth of 4.3 per cent a year earlier.
During the April-March period of 2013-14, the sector’s output contracted 0.8 per cent compared with 1.3 per cent growth previously.
Production of capital goods, a barometer of demand, shrank 12.5 per cent, in sharp contrast to an expansion of 9.6 per cent in the same month in 2013. The segment declined 3.7 per cent in 2013-14 over a contraction of 6 per cent in the comparable period.Overall, 12 of the 22 industry groups in manufacturing showed negative growth in March as compared to the corresponding month of 2013.
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