Millennium Post

Inflation at 3-month low; IIP rebounds to 13-month high

Some signs of improvement are visible in the economy now, with factory output growth rebounding to 13-month high of 3.4 per cent in April and retail inflation easing to 8.23 per cent in May on account of falling prices of essential food items.

The Index of Industrial Production (IIP) surged in April after contracting for two consecutive months, mainly due to better performance of manufacturing, mining and power sectors and higher output of capital goods. The previous high of 3.5 per cent was recorded in March, 2013.
As regards inflation, subdued prices of vegetables, cereals and dairy products pulled down the Consumer Price Index (CPI) to three-month low of 8.28 per cent in May. Commenting on data released on Thursday, CII Director General Chandrajit Banerjee said: ‘The return of industrial growth to the positive terrain is noteworthy and has rekindled the hope of industrial recovery which is critical to lift the economy and mark a return to the path of growth.’

Manufacturing, which constitutes over 75 per cent of the index, grew 2.6 per cent in April compared to a growth of 1.8 per cent a year ago. Production of capital goods, a barometer of demand, grew by 15.7 per cent in April in sharp contrast to a contraction in output by 0.3 per cent in same month last year.

The mining sector grew by 1.2 per cent in April as against a dip of 3.4 per a year earlier.Power generation increased by 11.9 per cent in the month as compared to 4.2 per cent in April, 2013.The IIP showed growth of 1.5 per cent in April, 2013.

In March this year, the growth in output contracted by 0.5 per cent after revision of the provisional estimates.Overall, 14 of the 22 industry groups in manufacturing showed a positive growth in April. The IIP in 2013-14 has declined by 0.1 per cent mainly due to poor performance of manufacturing sector. In 2012-13, it registered a meagre expansion of 1.1 per cent.

Observing that all the three major segments —mining, manufacturing and electricity — have posted positive growth in April, Banerjee said: ‘Going forward, CII expects that quick and proactive government policies would return the ‘feel good’ factor and firm up growth’
Ficci President Sidharth Birla said India Inc will be looking forward to ‘some big-ticket measures by the Government in its forthcoming budget which could send strong signals to investors and restore their confidence in the economy.’

Terming the rise in IIP as ‘encouraging’, President of PHD Chamber Sharad Jaipuria said implementation of new policy pronouncements would be critical to achieve future outcomes.

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. As regards April, the output of consumer goods declined by 5.1 per cent compared to growth of 1.7 per cent a year ago.The consumer durables segment contracted 7.6 per cent in April as against a decline of 9.6 per cent previously. Production of consumer non-durables also declined by 3.3 per cent compared with a growth of 11.3 per cent in April last year. Intermediate goods output expanded 4.4 per cent compared with 2.5 per cent a year earlier. Basic goods grew 6.8 per cent in April against a rise of 1.4 per cent a year ago.

 As far as retail inflation is concerned, moderating prices of vegetables, cereals and dairy products pushed down CPI in May to 8.28 per cent down from 8.59 per cent in April.
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