Industrial output for November jumped to a 25-month high of 8.4 per cent buoyed by higher output growth in manufacturing, consumer non-durables and infrastructure/construction goods sectors. The Index of Industrial Production (IIP) had grown at 2 per cent in October 2017 and by 5.1 per cent in November 2016.
Retail inflation print also recorded a rise to a 17-month high of 5.21 per cent in December led by an increase in food and housing prices, data released by Central Statistics Office (CSO) showed on Friday. Food inflation, as measured by the Consumer Food Price Index, rose to 4.96 per cent in December from 4.35 per cent in the previous month.
Retail inflation has been rising for the last five months and this is the second consecutive month when the headline inflation rate based on Consumer Price Index (Combined) has risen well above the Reserve Bank of India’s (RBI’s) medium-term inflation target of 4 per cent, diminishing hopes of any further rate cut this fiscal.
On a cumulative basis, industrial output has clocked a slower rate of growth than last year growing at 3.2 per cent during April-November, the first eight months of this financial year, as against 5.5 per cent in the same period last year.
Among the IIP’s nine broad categories, manufacturing sector, which accounts for 77.63 per cent of IIP, grew 10.2 per cent in November from 4 per cent a year ago.
In terms of industries, 15 out of the 23 industry groups in the manufacturing sector recorded growth during November 2017 as compared to previous year. The industry group ‘Manufacture of pharmaceuticals, medicinal chemical and botanical products’ recorded highest growth of 39.5 per cent, followed by 29.1 per cent growth in computers, electronic and optical products and 22.6 percent growth in ‘manufacture of other transport equipment’, the CSO said. The industry group ‘Other manufacturing’ recorded the highest negative growth of (-) 15.9 per cent, followed by ‘Manufacture of wearing apparel’ at (-)13.1 per cent and ‘Manufacture of electrical equipment’ at (-)11.2 per cent.
Capital goods output, a proxy for investment, grew by 9.4 per cent in November as against 5.3 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 23.1 per cent in November 2017 as against 3.3 per cent in November 2016. Infrastructure /construction goods recorded a growth of 13.5 per cent in November from 3.9 per cent a year ago.
“Industrial production seems to have picked up in November to a multiyear high on the back of restocking along with some improvement in demand due to festive demand. That said, rural demand still seems subdued as shown by consumer durables production and is unlikely to rebound in the near term,” Anis Chakravarty, lead economist, Deloitte India said.
Mining, electricity and consumer durables clocked a slower rate of growth than last year. Mining output grew at 1.1 per cent in November, sharply down from 8.1 per cent last year, while electricity recorded a growth of 3.9 per cent against 9.5 per cent a year ago. Consumer durables output grew 2.5 per cent in November, sharply down from 6.8 per cent last year.
Economists, however, said it may be too early to term it as an industrial recovery. “Terming this as industrial recovery will be too early. In August and September 2017, IIP growth was more than 4 per cent, however, in October 2017 it fell to 2 per cent…,” Devendra Kumar Pant, chief economist, India Ratings & Research said.
On the inflation front, food and beverages inflation rose to 4.85 per cent in December from 4.41 per cent a month ago. Housing inflation increased to 8.25 per cent from 7.36 per cent in November 2017. Core inflation, which excludes food and fuel inflation, remained above 5 per cent for the second consecutive month at 5.56 per cent. Eggs, vegetables and fruits turned costlier, while inflation moderated in case of cereals and pulses.