1. Economy not out of danger zone as inflation up, IIP down

Economy not out of danger zone as inflation up, IIP down

Indian economy is still not out of the woods as industrial production slackened to four-month low of 3.6 pct while retail inflation inched up to 5 pct.

By: | Published: November 12, 2015 11:25 PM

Indian economy is still not out of the woods as industrial production slackened to a four-month low of 3.6 per cent while retail inflation inched up to 5 per cent.

According to data released today by the Central Statistics Office (CSO), industrial production grew at 3.6 per cent in September compared to 2.6 per cent in the same month last year, mainly because of subdued performance of the manufacturing sector.

The retail inflation rose to four-month high of 5 per cent in October compared with 4.41 per cent in September this year and 4.62 per cent in October 2014.

“Two key macro indicators clearly point out that the economy still faces several tough challenges,” Assocham Secretary General D S Rawat said, adding that an effective strategy to deal with the situation is required so that the headline number does not convey an impression of inflation returning.

This will be the last set of macro data this year RBI will consider before it heads into its policy review due in December.

Retail inflation measured in terms of the consumer price index surged due to costlier pulses and other food items. Prices in the pulses and products category rose to a staggering 42.20 per cent in October.

While the price rise in the food and beverage category came in at 5.34 per cent in October, inflation in cereals and products was also higher at 1.46 per cent, CPI data released by CSO showed today.

“With aggressive measures in place to control the price increase, CII is confident of a moderation (in retail inflation), going forward. This should be supportive of general economic recovery in the second half of the year,” CII DG Chandrajit Banerjee said.

Industrial output growth, measured in terms of the index of industrial production (IIP), had grown by 2.6 per cent in September last year.

Meanwhile, the factory output was revised slightly downwards to 6.2 per cent for August, from the provisional estimate of 6.4 per cent earlier.

IIP stood at 4 per cent in April-September 2015 against 2.9 per cent in the year-ago period.

India Ratings & Research Chief Economist D K Pant said September IIP at 3.6 per cent is much lower than expectations.

“While consumer durable and capital goods production increased, slower growth of manufacturing sector pulled down IIP growth,” Pant added.

The manufacturing sector, which constitutes over 75 per cent of the index, grew 2.6 per cent in September 2015, against 2.7 per cent expansion in the same month last year.

Industry-wise, 11 out of 22 groups in the manufacturing sector showed positive growth in September.

The output of consumer non-durable goods contracted 4.6 per cent in the month under review against a growth of 1.3 per cent in September 2014.

The mining sector growth came in at 3 per cent in September 2015 against 0.1 per cent in the same month last fiscal.

Capital goods output, a proxy for investment, grew at 10.5 per cent as against 12.3 per cent a year earlier while power generation grew an annual 11.4 per cent in September.

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