Factory output growth slowed to 2.4 per cent in December from 7.3 per cent a year ago primarily due to slippage in output of manufacturing, mining and capital goods, data released by Central Statistics Office (CSO) Tuesday showed. Retail inflation continued to slide, easing to a 19-month low of 2.05 per cent in January, with food inflation continuing to remain in the negative zone, separate set of data released on Tuesday showed.
On a month-on-month basis, however, the industrial growth as measured by the Index of Industrial Production (IIP), increased from 0.3 per cent in November.
The industrial growth for November was revised downwards to 0.3 per cent from the provisional estimate of 0.5 per cent released last month. Cumulatively, for April-December 2018-19, industrial output grew at 4.6 per cent against 3.7 per cent in the same period of the previous financial year.
Manufacturing output, which accounts for 77.63 per cent of the index, grew at 2.7 per cent in December as against 8.7 per cent a year ago but was higher than contraction of 0.6 per cent in the previous month. Capital goods output, which is a proxy for investment demand, remained volatile growing 5.9 per cent in December as against 13.2 per cent in the corresponding period year ago, but was higher than contraction of 3.1 per cent a month ago.
Mining sector output contracted by 1 per cent in December as against 1.2 per cent growth in December 2017, the data showed.
Consumer durables output grew by 2.9 per cent as against a growth of 2.1 per cent in December 2017. Consumer non-durable goods growth was at 5.3 per cent in December compared with 16.8 per cent growth in the year-ago period.
Retail inflation in January is the lowest since June 2017 when it had touched 1.46 per cent. Consumer Food Price Index (CFPI) inflation stood at (-)2.17 per cent in January as against (-)2.65 per cent in December.
The ‘food and beverages’ segment registered a deflation of 1.29 per cent in January as against 1.49 per cent deflation a month ago. Vegetables recorded a deflation of 13.32 per cent in January as against a decline of 16.14 per cent a month ago, while sugar and confectionery registered 8.16 per cent deflation as against 9.22 per cent deflation a month ago. Inflation for the ‘fuel and light’ category moderated to 2.20 per cent in January from 4.54 per cent a month ago.
At 2.05 per cent, the overall retail inflation rate is much lower than the Reserve Bank of India’s (RBI’s) inflation projection of 2.8 per cent for January-March quarter. The RBI, which in its sixth bi-monthly monetary policy statement on February 7 cut policy rate by 25 basis points, had revised down its inflation projections citing low food inflation due to excess supply conditions domestically as well as internationally and larger than anticipated moderation in fuel inflation.
Experts said headline CPI is expected to stay benign in the coming months and provides room for further rate cut by the RBI. B Prasanna, head, Global Markets Group, ICICI Bank said, “The CPI number surprised positively and core inflation also moved lower. However, the conundrum of sharp spikes in rural health and education prices still remains and requires watching. RBI has recently revised the trajectory of CPI sharply lower and delivered a cut in policy rate. Our expectations for the next few months are also very benign on headline CPI and hence we believe that there is room for further accommodation in the next policy meeting.”