August industrial output growth at 6.4%; retail inflation rises 4.41% in Sept

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New Delhi | Updated: October 13, 2015 10:34 AM

Industrial output growth beat expectations to surge 6.4% in August from a revised 4.1% in the month of July, while retail inflation moved up to 4.41% in September...

retail inflationAnnual consumer price inflation quickened to 4.41 percent in September, compared with 5.63 percent a year ago, government data showed on Monday.(Reuters)

Industrial output growth beat expectations to surge 6.4% in August from a revised 4.1% in the month of July, while retail inflation moved up to 4.41% in September, compared with 3.74% in the previous month, according to government data released on Monday. Analysts were expecting industrial output growth at 4.8% in August, and 4.3% rise in retail inflation, according to a Thomson-Reuters poll.

Manufacturing grew 6.9% in August, compared with -1.1% a year before, while mining rose 3.8%, against 1.2% in the same period last year. Electricity generation picked up 5.6%, thanks to an unfavourable base (The segment grew 12.9% in August last year).

Food inflation — for long an irritant in the consumer price index (CPI)— stood at 3.88% in September, compared with 2.2% in August. This indicates that despite a deficient monsoon season, prices of most food items have not gone up, except for pulses which rose 23.65% in September, according to the data. However, some analysts point at a pick-up in core inflation.

Since global commodity prices are expected to remain low for some more time and food and fuel items comprise more than a half of the CPI basket, some analysts expect retail inflation to undershoot the Reserve Bank of India’s stated inflation target by January, even taking into account the fact that the favourable base effect might wane in the coming months. The central bank now expects retail inflation to touch 5.8% by January 2016. The RBI’s glide path calls for retail inflation under 5% by January 2017 and 4% by March 31, 2018.

Indian consumer inflation accelerates; factory output jumps

(Reuters) Annual consumer price inflation quickened to 4.41 percent in September from a year earlier, compared to an annualised 3.66 percent in August, government data showed on Monday.

That was slightly above analyst forecasts for consumer inflation of 4.3 percent.

At the same time separate data showed industrial output  grew a better-than-expected 6.4 percent in August compared with a downwardly revised 4.1 percent growth in July.


“While we do expect inflation to be below RBI’s trajectory of 5.8 percent by January 2016, room for further rate cuts will depend on comfort of achieving 5 percent target in January-March 2017, and also developments in the global financial markets on account of the impending U.S. Fed rate hike.

“Evolving supply-side dynamics in India could be another factor to be assessed by the RBI before further rate reductions, given that there was a bit of an upward surprise this month on the core (ex-transport) inflation.”


“Improvement in IIP (industrial output) growth was anticipated on account of revival in mining and electricity growth seen in the core sector numbers released earlier.

“But there seems to have been a strong sequential increase in manufacturing growth as well, after adjusting for seasonality. This contrasts with the decline in the same metric seen last month, and should be construed favourably as it indicates a pick-up in capacity utilization levels, which is a prerequisite for recovery in the capex cycle.

“We still expect only a gradual recovery in industrial output in months ahead, with external demand likely to be a drag.

“The latest number is more evidence that food price pressures are staying contained. Core inflation increased marginally but should not raise much concern. In all, the outturn supports the case for inflation undershooting the RBI forecast for January 2016 of 5.8 percent.

“While that should not imply any immediate easing in December, given that RBI frontloaded the easing and is now awaiting transmission, sustained favourable surprises can open up space for a residual cut in 2016.”


“The CPI number is largely on par, although food inflation has marginally gone up, which was also expected given onion and pulses prices had gone up.

“Given that there was a sharp fall in last year’s September number, this time the positive base effect has worn off.

“We don’t expect any change in RBI’s policy stance.”


“Within CPI there is some pressure building up in food price inflation, but still it’s lower than our expectation.

“IIP (industrial output) is a surprise and there are some volatile components in the data like cable and inflated rubber.

“Overall IIP number has been inching higher and this could be a bit exaggerated. The trend of recovery in growth continues, and macro environment is good with inflation under control. We don’t expect any change in the RBI’s stance.”

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