Aided by lower rate of food and fuel inflation, retail inflation for February slipped to a four-month low of 4.44 per cent from 5.07 per cent a month ago. Industrial output growth for January also recorded a bump up , rising to a two-month high of 7.5 per cent after moderating in the previous month to 7.1 per cent. At 4.44 per cent, the inflation rate based on Consumer Price Index (Combined) for February is sharply lower than the 5.1 per cent inflation rate estimated by the Reserve Bank of India (RBI) for the January-March quarter. Food inflation, as measured by the Consumer Food Price Index, moderated to 3.26 per cent in February from 4.70 per cent in the previous month, data released by the Central Statistics Office (CSO) showed. Inflation rate for 'food and beverages' segment moderated to 3.38 per cent in February from 4.58 per cent in the previous month, while the 'fuel and light' inflation rate moderated to 6.80 per cent from 7.73 per cent in January, CSO data showed. Inflation rate for vegetables was 17.57 per cent in February down from 26.97 per cent in January, while that for fruits was 4.80 per cent as against 6.24 per cent a month ago. Inflation rate for 'pan, tobacco and intoxicants' eased to 7.34 per cent in February, while housing inflation was recorded at 8.28 per cent in February. Economists said that the seasonal trend of rising food prices may curtail the slide in food inflation going ahead that is likely to result in status quo by the RBI in its next policy meeting. “While the prices of vegetables such as onions and tomatoes are continuing to correct, many other food items have recorded a sequential increase in prices so far in March 2018. The seasonal trend of rising food prices as the summer approaches, may prevent a further dip in food inflation in the ongoing month. The eventual rabi harvest, distribution of the 2018 monsoon and the operationalisation of the proposals made in the Union Budget for FY2019 including the launch of Operation Greens and the augmentation of minimum support prices, would impact the trajectory of food inflation going forward.the sharp dip in retail inflation in February 2018 has reinforced our expectation that the MPC would keep the repo rate unchanged in the upcoming policy review in April 2018,” Aditi Nayar, Principal Economist, ICRA said. Higher growth and a low base effect in capital goods and consumer durables supported the rise in industrial growth for January. Cumulatively, for April-January, industrial output growth continued to remain lower at 4.1 per cent as against 5 per cent in the same period a year ago. Manufacturing sector grew by 8.7 per cent during January compared with 2.5 per cent last year. Capital goods, an indicator of investment activity, showed a sharp increase in output by 14.6 per cent in January 2018 as against a decline of 0.6 per cent a year ago. 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 last year. Consumer durable goods recorded a growth rate of 8 per cent in January 2018 against a contraction of 2 per cent a year ago, the data showed. Capital goods output grew by 14.6 per cent in January as against a contraction of 0.6 per cent in the same period last year. The mining sector recorded a sharp slowdown with 0.1 per cent growth compared to 8.6 per cent a year ago, while infrastructure/construction goods output grew 6.8 per cent in February from 2.6 per cent last year. Economists said the rise in IIP growth number is a sign of early industrial revival, even as low growth for mining sector is a concern. “This is the third consecutive month in which factory output has clocked a high single digit growth. This looks like an early sign of industrial revival. Moreover, the manufacturing which has a weight of 77.63 per cent in the IIP is showing the sustenance of the growth momentum. Even at the use based classification the growth is broad based as with the exception of intermediate goods all other segments have shown growth either in high single digit or greater than high single digit. Particularly heartening is the third consecutive month of double digit growth recorded by the capital goods sector a proxy for investment demand. Also heartening is the performance of consumer durable sector, which has recorded a growth of 8 per cent for the first after demonetisation. It looks like post-demonetisation and GST implementation finally the industrial sector is gaining traction. Mining sector is a dampener in IIP data and may be cause of concern from mining related industries,” Devendra Kumar Pant, chief economist, India Ratings and Research said. 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. The rising trend in manufacturing growth also shows that the underlying growth momentum is positive. What is encouraging is that the capital goods sector has posted robust growth during the month backed by new orders and improved demand. What is also noteworthy is the spike in consumer durables and non-durables demand. Looking ahead, we expect that industrial performance would be on a clear up slope with both consumption and investment picking up pace during the year.”
