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January inflation eases to 5.07%, December IIP lower at 7.1%

Author: IANS/Tuesday, February 13, 2018/Categories: Economy

January inflation eases to 5.07%, December IIP lower at 7.1%

New Delhi , - A slight easing of food prices helped lower India's retail inflation in January to 5.07% even as factory production growth slowed somewhat in December to 7.1%, according to official data on Monday.

India Inc lauded the continuing high single-digit recovery in industry as well as the slight fall in inflation. 

While retail inflation was 5.21% in December 2017, the Index of Industrial Production (IIP) had grown at an impressive 8.8% in November.

On a year-on-year basis, the consumer price index (CPI) last month was at a much higher level than the 3.17% in January 2017.

The consumer food price index (CFPI) in January stood at 4.58% compared with the 4.85% of December 2017.

As per the data released by the Central Statistics Office (CSO), the sequential slowdown in factory output was mainly on account of lower production in the manufacturing sector.

However, on a year-on-year basis, the manufacturing sector expanded by a healthy 8.4%, while the mining sector's output inched up by 1.2% and the sub-index of electricity generation increased by 4.4%.

"In terms of industries, 16 out of the 23 industry groups in manufacturing sector have shown positive growth during December 2017 compared with corresponding month of the previous year," the CSO said.

According to the data, the industry group 'manufacture of other transport equipment' has shown the highest growth of 38.3% followed by 33.6% in 'manufacture of pharmaceuticals, medicinal chemicals and botanical products' and 29.8% in 'manufacture of computers, elecronic and optical products'. 

Last week, The Reserve Bank of India (RBI) kept its key interest rate unchanged at 6% for the third time in succession at its final bi-monthly monetary policy review of the fiscal, citing upside risks for inflation from rising global crude oil prices and other domestic factors.

The RBI said its decision to keep its repo rate, or short-term lending rate for commercial banks, unchanged is consistent with the neutral stance of the central bank aimed at achieving its median inflation target of 4%. 

"We expect headline inflation to be at 5.1% in the fourth quarter (January-March), including the impact of HRA (house rent allowance) to central employees, up from the 4.6% in Q3," RBI Governor Urjit Patel told reporters in Mumbai after the release of the monetary policy review.

However, the fact that the central bank did not raise the repo rate in the face of hardening inflation as recommended by one of the six monetary policy committee (MPC) members is being considered as an attempt to aid in economic recovery.

Industry chamber Assocham termed the IIP data "a positive sign towards growth cycle of industrial activity in India".

"However, risks to the Indian economy continues to prevail in the forms of continued uncertainties in the global environment due to geo-political situations, including rising global protectionism could further delay a meaningful recovery of external demand," said Assocham President Sandeep Jajodia.

"Besides, private investment continues to face several impediments in the form of corporate debt overhang, stress in the financial sector, where (banks') NPAs (non-performing assets) continue to increase, excess capacity and regulatory and policy challenges," he added.

"This is the second consecutive month in which IIP has shown high single-digit growth, which is encouraging," India Ratings and Research (Ind-Ra) Principal Economist Sunil Kumar Sinha said in a statement. 

"However, Ind-Ra believes it still early to read much from these numbers as these have been calculated on a low base when industrial output had collapsed due to the impact of demonetisation," he said.

"Retail inflation came down to 5.07% in January 2018, lower than 5.21% recorded last month, but remained higher than the RBI's base target value of 4%," he added.

Rating agency Crisil said that inflation, however, continued to firm up in large parts of the services sectors such as housing, driven by the revision in house rent allowance payments, education and in recreation, amusement and personal care and effects. 

"Yet, core inflation, stayed broadly unchanged from the previous month, at around 5.1% in January," a Crisil release said. 

"The industry seems to be shedding away the weight of GST-related glitches behind and trying to get back lost momentum, as both domestic and global growth surge."

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rajyashree guha

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