India’s factory output accelerated to 4.3% in July from a downward-revised 1.2% a month ago while retail inflation quickened to 3.21% in August from 3.15% in the previous month, remaining within the central bank’s comfort zone. This could lead to another round of rate cuts by the Reserve Bank of India in October, given the state of the economy.
India’s economy reported its weakest growth in more than six years at 5% in the June quarter and slowed for the sixth straight quarter, prompting the government to unleash a spate of measures to spur economic activity.
This is the 13th month in a row for a sub-4% retail inflation figure. The Index of Industrial Production (IIP) grew 6.5% in July 2018.
The RBI has projected India’s gross domestic product growth for 2019-20 at 6.9%—in the range of 5.8-6.6% for the first half of 2019-20 and 7.3-7.5% for the second half. While most analysts and financial institutions have estimated a growth rate between 6.5% and 7% for 2019-20, Moody’s has pegged GDP growth at 6.4% for the same period.
During July, manufacturing made a strong comeback, growing at 4.2%, while electricity surprisingly decelerated, growing at only 4.8%. Mining output grew at a robust pace of 4.9% during the month. The pick-up in growth seems to have come on the back of intermediate goods, which grew in the double digits at 13.9% even as capital goods contracted by 7.1%. Consumer durables also shrank 2.7% due to the slump in automobile sales while consumer non-durables grew at a healthy pace of 8.3%.
On the retail inflation side, food inflation quickened to 2.99% in August from 2.36% a month ago on the back of rising prices of meat and fish, vegetables and pulses.