IIP up, inflation eases; industry calls for RBI rate cut

The Reserve Bank of India (RBI) is scheduled to come out with next monetary policy review on 5 April 2018. It had kept the policy rate unchanged in its February review on fears of inflation

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New Delhi: Industrial production expanded at 7.5% in January while retail inflation eased to 4.4% in February, raising industry clamour for a rate cut by the RBI next month to maintain growth momentum.

The Reserve Bank of India (RBI) is scheduled to come out with next monetary policy review on 5 April 2018. It had kept the policy rate unchanged in its February review on fears of inflation.

According to the data released by the Central Statistics Organisation (CSO), retail inflation measured in term of Consumer Price Index fell to a four-month low of 4.44% in February on cheaper food articles and lower cost for fuel.

Retail inflation was 5.07% in January. In February 2017, however, it was 3.65%.

Observing that retail inflation has softened on account of a downswing in food prices, industry chamber CII said, “This should spur the RBI to resume its rate easing cycle to give a boost to the nascent recovery currently underway in the economy.”

Industrial production grew at 7.5% in January 2018 against 3.5% in the year-ago on account of the good performance by manufacturing coupled with the higher offtake of consumer and capital goods.

The Index of Industrial Production (IIP) had grown at 7.1% in December 2017, according to the data released by the CSO today.

“The strengthening of the manufacturing sector for the second month in a row signals that industry is bouncing back from GST-related glitches and could be on track to reap the benefits of domestic and global growth recovery,” CRISIL said.

The IIP growth in January this year was mainly on account of an uptick in the manufacturing sector which constitutes 77.63% of the index. It grew by 8.7% during the month as compared to 2.5% in January 2017, showing signs of recovery in the economy.

Capital goods, a barometer of investments, showed a sharp increase in output by 14.6% in January 2018 as against a decline of 0.6% a year ago.

Consumer non-durable goods, which are mainly fast moving consumer goods, too showed an increase of 10.5% as against a growth of 9.6%. Consumer durable goods recorded a growth rate of 8% in January 2018 against a contraction of 2% a year ago.

However, the mining sector saw a flat growth of 0.15 compared to 8.6% a year ago.

As per use-based classification, the growth rates in January 2018 over January 2017 are 5.8% in primary goods, 4.9% in intermediate goods and 6.8% in Infrastructure/ Construction Goods.

In terms of industries, 16 out of 23 industry groups in the manufacturing sector showed positive growth during January, 2018.

IIP grew at 4.1% in April-January this fiscal as compared to 5% in the same period in previous financial year.

On IIP numbers, industry chamber Assocham said that it would be safe to assume that a lot of advantage has accrued because of the low base effect of the previous year when the growth had plunged following demonetisation.

PTI