India's factory output jumps, retail inflation also up

Wednesday 17th June 2015 06:34 EDT

India's factory output for April showed a 4.1 per cent growth, against 2.1 per cent for the month before but retail inflation also inched up to 5.01 per cent in May due to higher food prices. The retail, or the consumer price indexed (CPI) inflation, in the corresponding month of 2014 was at 8.33 per cent, the Central Statistics Office (CSO) data showed. The CPI-urban for May stood at 4.41 per cent and rural at 5.52 per cent.

May's food inflation stood at 4.8 per cent from the previous month's rate of 5.11 per cent.

In this connection, the Reserve Bank of India, last week, reduced its repo rate, that is the rate at which it lends to commercial banks, from 7.5 per cent to 7.25 per cent.

Giving reasons for the monetary policy stance, RBI Governor Raghuram Rajan said plans for lower food output needed to be in place, global financial markets were volatile, factory output was recovering unevenly, services sector was emitting mixed signals, fuel inflation was up, exports were down and liquidity had improved.

Even as retail inflation came in line with the equities markets and the industry's expectations, it was the factory output that surprised many. An uptick in manufacturing pushed up India's factory output to 4.1 per cent in April, against 2.1 per cent in the month before. Further, among the six sectoral indices, capital goods expanded by 11.1 per cent.

The factory output had grown at a slower pace of 2.1 per cent in March from 5 per cent in February. The factory output had stood at 3.7 per cent in April, 2014. According to the CSO data on the Index of Industrial Production (IIP), the healthy growth in the factory output for April was attributed to an uptick in the manufacturing sector.

The manufacturing sector, which has the maximum weightage in the IIP, grew by 5.1 per cent in the month under review from 2.2 per cent in March.

For the other two major sub-indices of the IIP, the CSO data showed that the index for the mining sector inched up by 0.6 per cent against 0.9 per cent in March, while that for electricity segment was down 0.5 per cent in April, against a growth of 2 per cent in the month before.

The three sub-indices of the IIP namely manufacturing, mining and electricity, had registered a growth of 3 per cent, 1.7 per cent and 11.9 per cent in April, 2014 respectively.

The present data also showed that among the six use-based classifications of the index, the output of capital goods expanded by 11.1 per cent. The capital goods segment is a key indicator of economic activity.

Consumer non-durables, intermediate goods, consumer goods and basic goods also posted a healthy performance. These sectors grew by 4.4 per cent, 3.3 per cent, 3.1 per cent and 2.8 per cent respectively.

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