Retail inflation eases to 4.4 percent in February, IIP growth boosts to 7.5 per cent

12 March,New Delhi


India’s retail inflation fell to 4.4 percent in February as prices of vegetables and other food and beverages softened, while the Index of Industrial Production (IIP) for the month of January stood at 7.5 per cent against the cumulative IIP for the 10 months period (Apr-Jan) of 4.1per cent, data released by Central Statistics Office on Monday showed.

The rate of increase in price rise slowed for the second consecutive month after hitting a fresh high of 5.2 percent growth in December and 5.07 percent in January due to unusual pick-up in food prices and rise in domestic petrol and diesel prices.

Retail inflation, measured by Consumer Price Index (CPI) is the main price gauge that the Reserve Bank of India (RBI) tracks.

Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, fell to 3.38 percent in February as compared with a 4.58 percent growth in January.

Last month, the RBI’s Monetary Policy Committee (MPC) estimated inflation at 5.1 per cent in the quarter ended March, including the impact of house rent allowance. It also estimated the retail inflation for 2018-19 in the range of 5.1-5.6 percent during April-September and 4.5-4.6 percent in the second half of the year.

Among the components of IIP, mining stood at just 0.1 per cent but manufacturing and electricity flattered at 8.7 per cent and 7.6 per cent respectively. Manufacturing accounts for over 70 per cent of the IIP composition. In terms of specific industry groups, 16 out of the 23 industry group classifications showed positive growth in IIP. As per Use-based classification, the growth rates in January 2018 over January 2017 are 5.8 percent in Primary goods, 14.6 percent in Capital goods, 4.9 percent in Intermediate goods and 6.8 percent in Infrastructure/ Construction Goods. The Consumer durables and Consumer non-durables have recorded growth of 8.0 percent and 10.5 percent respectively.

Terming the 7.5 per cent IIP growth as “quite good”, the ASSOCHAM Secretary General DS Rawat said the IIP expansion beyond 7 per cent for the last three months gives additional boost to the sentiment. 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 the demonetization.

However, he said, “We can see an underlying pick up in the growth trajectory”. When it comes to consumer inflation, 4.4 per cent in February, 2018 may be lower than January, the undercurrent remains biased on the upside, making RBI disinclined towards any rate cut, though the industry would like it to happen.” “What is gratifying among the major growth sectors is that they consist of segment like transport equipment, motor vehicles, trailers and semi-trailers which are normally lead indicators of a larger recovery in macroeconomic growth and capital spending,” Mr. Jaikishan J Parmar, Research Analyst, Angel Broking said.

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