March 18, 2018

Inflation falls to 4.4 per cent, factory growth rises

13 March 2018, 04:14 | Kenneth Drake

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"Further, adverse base effect will move inflation to its peak of around 5.5-6.0 percent before gliding towards 4.5 percent by March 2019".

Analysts polled by Reuters had predicted February's rate would ease to 4.8% from 5.1% in January.

India's industrial production rose by 7.5% in January 2018 compared to that in January 2017, data released by the Ministry of Statistics and Programme Implementation showed. The central bank expects retail inflation to pick up to 5.1 percent to 5.6 percent in April-September before easing, assuming normal rainfall. "Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in worldwide crude oil prices".

But, on a cumulative basis, the IIP expanded by 4.1 per cent between April and January 2017-18, which was lower than the 5 per cent growth in the same period a year ago.

"The downward move in inflation is on the back of seasonal food price reduction".

In terms of industries, 16 out of the 22 industry groups in the manufacturing sector showed positive growth in January.

Factory output measured by the index of industrial production (IIP) is the closest approximation for measuring economic activity in the country's business landscape. The manufacturing sector grew 8.7 per cent in January, and 10.7 per cent and 8.4 per cent in November and December, respectively.

Meanwhile, the Consumer Price Index inflation for February fell to 4.44% for February 2018 compared to the same month in 2017. Consumer non-durable goods, which are mainly fast moving consumer goods, also recorded an increase of 10.5 per cent as against a growth of 9.6 per cent previous year. This looks like an early sign of industrial revival.

According to Devendra Pant, Chief Economist at India Ratings, robust growth of consumption-related sectors will provide stability of Gross Domestic Product (GDP) growth in the next financial year as private final consumption expenditure (PFCE) is the biggest component while calculating GDP.

However, the mining sector saw a flat growth of 0.1 per cent compared with 8.6 per cent a year ago.

Chandrajit Banerjee, director general, CII said: "The visible improvement in industrial output, which rose to 7.5 per cent at the onset of the New Year as against 3.5 per cent last year, augurs well for the return of broad based recovery in industrial performance during the year".

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