An 8.7% growth in manufacturing output pushed Index of Industrial Production (IIP) above the 7% mark for the fourth consecutive month. Graphic: Mint
An 8.7% growth in manufacturing output pushed Index of Industrial Production (IIP) above the 7% mark for the fourth consecutive month. Graphic: Mint

Boost for Indian economy as inflation eases further, industrial growth rises

India's IIP grew at a robust 7.1% in February while CPI decelerated for the fourth consecutive month to 4.28% in March, leading to expectation that the Indian economy may be on a sustained recovery path

New Delhi: India’s factory output grew at a robust 7.1% in February while retail inflation decelerated for the fourth consecutive month to 4.28% in March, leading to expectation that the Indian economy may be on a sustained recovery path.

While the Consumer Price Index (CPI) benefitted from softening food inflation (3.26% in February to 2.81% in March), an 8.7% growth in manufacturing output pushed Index of Industrial Production (IIP) above the 7% mark for the fourth consecutive month.

Both sets of data were released by the Central Statistics Office (CSO) on Thursday.

The Reserve Bank of India (RBI) has lowered its inflation forecast for 2018-19 to 4.7%-5.1% in the first half and 4.4% in the second half. The central bank has a mandate of achieving the medium-term target for inflation of 4% within a band of +/- 2 percentage points, while supporting growth.

IIP had grown by 1.2% in February 2017. It had recorded a growth of 8.54% in November, 7.1% in December and 7.4% in January, according to the revised data put out by the CSO. For the April 2017 to February 2018 period, IIP growth slowed to 4.3% from 4.7% from the same period a year earlier.

The manufacturing sector, which constitutes over 77% of the index, grew at 8.7% in February as compared to almost flat growth of 0.7% in the same month a year ago. Capital goods output rose by a robust 20% in the month under review as against a contraction of 2.4% earlier. Consumer durables grew 7.9% as against a contraction of 4.6% in February 2017. Electricity generation rose by 4.5% compared to 1.2%. Mining output, however, saw a decline—0.3% against a growth 4.6% a year earlier.

The CSO data showed that retail inflation slipped to a five-month low 4.28% in March but was higher than 3.89% recorded in the same month last year. The previous lowest of 3.58% was recorded in October 2017. Inflation in the vegetables segment cooled to 11.7% in March from 17.57% in February. The rate of price rise in protein-rich items like eggs, milk and other products too moderated in March as against the previous month.

Reacting to the macroeconomic data, commerce and industry minister Suresh Prabhu said in a tweet: “The IIP for the manufacturing sector in February 2018 stands at 130.1 which is 8.7% higher than in February 2017 with 15 out of the 23 industry groups showing positive growth. Economic indicators continue to reflect the Indian growth story! IIP in February 2018 stands at 127.7, which is 7.1% higher as compared to the level in the month of February 2017."

Economic affairs secretary Subhash Chandra Garg tweeted: “Another very good IIP growth number came out today. For Feb 2018, IIP rose by 7.1%. Manufacturing grew by 8.7% marking fourth month of growth over 8.5%. Capital goods grew by 20% with last three months growth being over 15%."

Commenting on the IIP numbers, industry body Assocham said, “A smart growth in the capital goods along with manufacturing leading to 7.1% industrial growth in February 2018 signals revival in the business sentiment in terms of fresh investments."

Anis Chakravarty of Deloitte India said the downward growth movement of food inflation has had a larger than expected role to play in easing inflation prints and improved monsoon prospects are likely to keep food inflation concerns at bay, at least for some time to come.

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