Home / Financial News / IIP rises 3.8% in Nov; retail inflation at 5.0% in Dec

IIP rises 3.8% in Nov; retail inflation at 5.0% in Dec

Exceeding the expectation of a marginal improvement after contracting 4.2 per cent the previous month, India’s industrial output grew 3.8 per cent in November, showed the Index of Industrial Production (IIP) data released on Monday. The rate of retail inflation, as measured by the consumer price index (CPI), meanwhile, rose to five per cent in December from 4.4 per cent in November.

Cumulative industrial growth during the April-November period of this financial year now stands at 2.2 per cent.

The manufacturing sector, which has a weight of over 75 per cent on the index, grew three per cent. The sector had contracted 7.6 per cent in October. Of the 22 industrial segments in the manufacturing sector, 16 showed expansion.

Electricity generation continued to see robust improvement, with the sector growing at 10 per cent during the month. Mining, though, slowed down to 3.4 per cent after growing at 13.3 per cent the previous month.

Capital goods, considered a proxy of investment demand grew 6.5 per cent, even as continued weakness was observed in the consumer durables segment, which contracted 14.5 per cent in November.

However, despite stronger-than-expected growth in industrial production, concerns remain. Recent data reveal rural wages grew at a slower pace than inflation, implying negative real growth. This could be a worrying sign, given that it is rural demand that has been propping up the economy.

On the retail inflation front, urban areas recorded a higher rate, at 5.3 per cent, than the 4.7 per cent in rural parts. Food inflation edged up in December to 4.78 per cent from 3.14 per cent the previous month. A possible explanation for the rise in food inflation could be the full impact of a sub-normal and regionally skewed monsoon being reflected now.

The rate of fuel and light inflation, at 3.41 per cent, was marginally higher than the 3.3 per cent seen in November.

The latest data on inflation seem to justify the Reserve Bank of India’s (RBI’s) position that the recent moderation in inflation is transitory in nature and could reverse. However, with inflation below RBI’s January 2016 target of six per cent, there could still be some clamour from industry for a reduction in the policy rate. The central bank might have room to do so after the Union Budget.

UNEXPECTED GROWTH |Create infographics

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