After rising to a 17-month high in December, retail inflation moderated to a two-month low of 5.07 per cent in January aided by lower rate of food inflation. Food inflation, as measured by the Consumer Food Price Index, rose to 4.70 per cent in January from 4.96 per cent in the previous month. The inflation rate based on Consumer Price Index (Combined) eased in January from 5.21 per cent in December and is in line with the 5.1 per cent inflation rate estimated by the Reserve Bank of India (RBI) for the January-March quarter.
Industrial output growth in December slowed to 7.1 per cent from a 25-month high growth of 8.8 per cent last month, data released by Central Statistics Office (CSO) on Monday showed.
A favourable base effect and a double-digit growth in capital goods and consumer non-durables helped the Index of Industrial Production (IIP) to register a 7.1 per cent growth in December. The CSO revised upwards IIP growth rate for November to 8.8 per cent from earlier rate of 8.4 per cent. Cumulatively, the industrial growth for April-December, the first nine months of this financial year, grew at a slower pace at 3.7 per cent from 5.1 per cent growth last year.
Digestive enzymes and antacids, which have a 0.22 per cent in IIP, continued to be the top contributors for the IIP growth in December, followed by cement, electricity,diesel and two-wheelers. In terms of industries, sixteen out of the twenty three industry groups in the manufacturing sector recorded positive growth during December, with the industry group ‘Manufacture of other transport equipment’ registering the highest positive growth of 38.3 per cent followed by ‘Manufacture of pharmaceuticals, medicinal chemical and botanical products’ (33.6 per cent) and ‘Manufacture of computer, electronic and optical products’ (29.8 percent).
Electric heaters, gold jewellery, tobacco products, knitted readymade garments and medical/surgical accessories were among the highest negative contributors for IIP in December, the CSO said.
Manufacturing sector grew 8.4 per cent in December as against 0.6 per cent last year. Capital goods output grew by 16.4 per cent in December against a contraction of 6.2 per cent a year ago. The other big driver for IIP’s growth was consumer non-durables comprising mainly of fast moving consumer goods that recorded a growth of 16.5 per cent in December 2017. Infrastructure/construction goods recorded a growth of 6.7 per cent in December from 5.5 per cent a year ago.
Economists said that it may be premature to term the double-digit growth in capital goods as a sign of pickup in investment activity. “In our view, it remains somewhat premature to attribute the recent double-digit growth in capital goods to a pickup in investment activity, as it benefits from the rebuilding of inventories for sub-sectors such as commercial vehicles as well as a favourable base effect related to the 6.2 per cent contraction in December 2016. The high 16.5 per cent growth of consumer non-durables in December 2017 was augmented to a considerable extent by the sharp 88.4 per cent expansion in output of digestive enzymes and antacids, with a weight of just 0.2 per cent in the IIP,” Aditi Nayar, Principal Economist, ICRA said.
Inflation rate for ‘food and beverages’ moderated to 4.58 per cent in January from 4.85 per cent in the previous month, while that for ‘pan, tobacco and intoxicants’ eased to 7.58 per cent in January from 7.73 per cent a month ago. Housing inflation was recorded at 8.33 per cent in January as against 8.25 per cent a month ago and ‘fuel and light’ inflation rate moderated to 7.73 per cent in January from 7.90 per cent a month ago, CSO data showed.
“Numbers are along RBI’s revised projections, with the next six months to stay firm on arithmetic terms i.e due to base effects. RBI has indicated that it will look through near-term prints and today’s numbers dont warrant any change in their neutral policy stance,” Radhika Rao, India Economist, DBS Bank said.