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February IIP slips to 20-month low, retail inflation for March inches up

Cumulatively, the IIP growth during April-February stood at 4.0 per cent (Express File Photo: Praveen Khanna)

Factory output slid to a 20-month low of 0.1 per cent in February from 6.9 per cent a year ago due to contraction in manufacturing and an adverse base effect, data released by Central Statistics Office (CSO) Friday showed. Retail inflation, based on Consumer Price Index (Combined), rose to a five-month high of 2.86 per cent in March, primarily on account of food inflation reversing the deflationary trend after five months and higher fuel prices, separate set of data released Friday showed.

Manufacturing output in Index of Industrial Production (IIP) slipped again into negative territory after a gap of two months, contracting 0.3 per cent in February as against a growth of 8.4 per cent in the year-ago period and 1.0 per cent growth in previous month. This coupled with negative growth in capital goods output, an indicator of investment activity, prompted economists to predict a dismal picture of industrial recovery in the coming months. Weaker industrial growth is an indicator of a slowdown in GDP growth for the fourth quarter of the financial year ended March 31.

"Capital goods sector which had shown an average growth of 8.9% during April-October period during FY19 and raised the hope of an incipient investment recovery in the economy is once again seems to losing steam. With the exception of December 2018, capital goods is recording negative growth in each month since November. India Ratings and Research has been consistently articulating that given the fluctuation in the IIP growth data it is difficult to believe that we are on our way to a broad based and sustainable industrial recovery," Devendra Kumar Pant, Chief Economist, India Ratings & Research said. Sector-wise data showed that the growth in capital goods contracted 8.8 per cent in February as against 3.4 per cent contraction in previous month and 16.6 per cent growth in same period last year, while mining sector rose to 2.0 per cent in February from (-)0.4 per cent last year. Intermediate goods output remained in the negative zone for the fourth consecutive month at 4.9 per cent in February as against 3.4 per cent growth in previous financial year. Consumer durables and consumer non-durables recorded growth of 1.2 per cent and 4.3 per cent respectively

Cumulatively, the IIP growth during April-February stood at 4.0 per cent, lower than 4.3 per cent a year ago. Retail inflation in March is the highest since October 2018 when it had touched 3.38 per cent. Consumer Food Price Index (CFPI) inflation stood at 0.30 per cent in March as against (-)0.73 per cent in February.

The 'food and beverages' segment registered an inflation of 0.66 per cent in March, with meat and fish recording inflation of 6.55 per cent. Fruits and vegetables continued to register deflation at (-)5.88 per cent and (-)4.90 per cent, respectively. Inflation for the 'fuel and light' category rose to 2.42 per cent in March as against provisional 1.24 per cent in February.

At 2.86 per cent, the overall retail inflation rate is higher than than the Reserve Bank of India's (RBI's) inflation projection of 2.4 per cent for January-March quarter, but lower than the 2.9-3.0 per cent range for first half of this financial year.

B Prasanna, Group Head – Global Markets-Sales, Trading and Research, ICICI Bank said, "CPI for March picked up sharply on account of food and fuel prices. However, in an encouraging development, core inflation has moderated substantially reflecting slower growth momentum. Further rate cuts though not ruled out, would be data dependent based on clarity on food and fuel trajectory, fiscal situation and some indication of transmission of the twin rate cuts."