Industry expresses concern after poor IIP figures.
Industrial output contracted by 1.2% in February while the retail inflation rose to 3.81% in March, prompting the industry to pitch for more reforms to deal with economic woes.
The industrial output, according to data released today, slipped to a 4-month low contracting by 1.2% in February because of decline in the manufacturing sector and lower offtake of capital as well as consumer goods. The Index of Industrial Production (IIP) had registered a growth of 1.99% in February last year. Also, the consumer price index-based inflation rose to a 5-month high of 3.81% in March against 3.65% in February.
Commenting on IIP data, FICCI president Pankaj Patel said: "The fall in the manufacturing sector ... indicates that the growth remains fragile in manufacturing and need continued efforts to make the sector competitive. "The government should continue its reform measures and deepen it in times to come to strengthen the manufacturing sector." The decline in the IIP in February is mainly due to 2% contraction in manufacturing, which constitutes over 75% of the index. The sector had recorded a meagre growth of 0.6% in February, 2016.
The capital goods output declined by 3.4% during the month over a contraction of 9.3% last year. Likewise, the overall consumer goods production declined by 5.6% in the month against 0.6% growth in year-ago period. The non-durable consumer goods output shrank by 8.6% in February over a contraction of 4.9% year ago.
In the consumer-durable segment, the output dipped by 0.9% in February against a growth of 10.4% in same month last year. Retail inflation for March was a little elevated against February's 3.65%. Even though, the rate of price rise for overall food category was lower at 1.93% than 2.01% recorded in February.
Protein rich items such as milk & products and eggs were costlier during the month with inflation prints of 4.69% and 3.21% respectively. Vegetable prices continued to show deflationary trend at an inflation print of (-)7.24% in March against (-)8.29% in previous month. The rate of price rise in fuel and light was at 5.56%. For milk & products and eggs, prices were up by 4.69% and 3.21% respectively. Prices of prepared meals, snacks and sweets grew by 5.65%. "The CPI reading for March 2017 is a positive surprise...
the trajectory that the RBI has indicated, builds in an upturn in inflation from first half to second half, which suggests a high likelihood of a prolonged pause for the policy rate," ratings firm ICRA stated. SBI's economic research department suggested that CPI inflation is unlikely to breach the 4% mark till July. "If this is so, the RBI inflation forecast of 4-4.5% will be materially undershot," it added.
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