‘IIP drop, CPI uptick don’t augur well for economy’

By: | Published: May 12, 2016 11:31 PM

Disappointed with the fall in industrial output and rise in retail inflation, industry and experts said the double whammy "does not augur well" for economic growth, and government should push policy reforms.

InflationDisappointed with the fall in industrial output and rise in retail inflation, industry and experts said the double whammy “does not augur well” for economic growth, and government should push policy reforms. (Reuters)

Disappointed with the fall in industrial output and rise in retail inflation, industry and experts said the double whammy “does not augur well” for economic growth, and government should push policy reforms.

Pinning hopes on a favourable monsoon, economists said food price pressures are expected to ease going forward.

“The macro picture looks challenging once again,” said Assocham President Sunil Kanoria on the twin data released today showing industrial output growth plunging to 0.1 per cent in March and inflation racing to 5.39 per cent in April.

The big picture looks “far more difficult making it imperative for the government to bring in policy reforms and demand push measures”, he added.

Industrial production growth plunged to 0.1 per cent in March due to poor performance of manufacturing and mining sectors coupled with sharp decline in output of capital goods.

“The growth in manufacturing for the last year is disappointing and emphasizes the need for more deep rooted reforms for the sector to make its growth sustainable in the long run,” Ficci President Harshvardhan Neotia said.

The manufacturing sector, which accounts for over 75 per cent of the index, declined by 1.2 per cent in March against a growth of 2.7 per cent in same month a year ago. In 2015-16, the sector grew at 2 per cent against 2.3 per cent in previous year.

“The contraction in manufacturing growth on a volume basis in Q4 FY2016 does not augur well for the upcoming GDP growth print,” Senior Economist ICRA Limited Aditi Nayar said.

Meanwhile, retail inflation soared to 5.39 per cent in April on higher food prices, reversing a downward trend seen in recent months.

Food inflation rose to 6.32 per cent in April against 5.21 per cent in March, the data released by the Ministry of Statistics and Programme Implementation (MoSPI) showed.

“The RBI will be observing this closely as the present drought conditions in Maharashtra and other parts with zero reservoir levels can lead to pressure on some products even if the monsoon is normal given the rather difficult conditions prevailing here,” CARE Ratings said.

However, Suvodeep Rakshit, Economist, Kotak Institutional Equities, said: “We expect food price pressures to ease once the monsoons set in and provided the spatial and temporal distribution is favourable”.

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