Signs of a broad-based economic recovery and lower inflation led India Inc and economist to paint a “bright” outlook picture of the Indian economy, as lower food prices eased India’s March retail inflation to 4.28 per cent, and factory production growth slowed somewhat in February to 7.1 per cent.
On Thursday, the data released by Central Statistics Office (CSO), revealed that March retail inflation eased to 4.28 per cent from 4.44 per cent in February 2018. However, on a year-on-year (YoY) basis, the consumer price index (CPI) in March stood higher than the 3.89 per cent reported for March 2017.
The data pointed out that the consumer food price index (CFPI) stood at 2.81 per cent in March compared to 3.26 per cent in February 2018.
Product-wise, a rise in prices of vegetables, milk-based products, eggs, meat and fish pushed the retail inflation higher on a YoY basis. Prices of vegetables in March were higher by a whopping 11.70 per cent, while those of milk-based products rose by 3.52 per cent.
In contrast, the category of “pulses and products” became cheaper by (-) 13.41 per cent and that of “sugar and confectionery” by (-) 1.61 per cent.
Among non-food categories, the “fuel and light” segment’s inflation rate accelerated to 5.73 per cent in March.
In terms of industrial production, the CSO data revealed that the Index of Industrial Production (IIP) marginally declined in February to 7.13 per cent from a rise of 7.39 per cent in January 2018 and a mere growth of 1.2 per cent in the corresponding period of last year.
As per the IIP data, the sequential slowdown in factory output was mainly on account of lower production in the mining sector.
On a YoY basis, the manufacturing sector expanded by a healthy 8.7 per cent, while the mining sector’s output dipped by (-) 0.3 per cent and the sub-index of electricity generation increased by 4.5 per cent.
The data disclosed that among the six use-based classification groups, the output of primary goods which has the highest weightage of 34.04 grew by 3.7 per cent. The output of intermediate goods which has the second highest weightage rose by 3.3 per cent.
Similarly, consumer non-durables’s output edged-higher. It rose by 7.4 per cent and that of consumer durables by 7.9 per cent.
In addition, infrastructure or construction goods’ output increased by 12.6 per cent and that of capital goods by 20 per cent.
On its part, India Inc lauded the continuing high single-digit recovery in industry as well as the slight fall in inflation.
Industry body Assocham’s Secretary General D.S. Rawat said: “Though a favourable base effect has helped the industrial growth numbers, other indicators like increase in demand for credit along with ability of the producers to raise prices of non-food items all point towards a confidence building macro picture.”
“The retail inflation at 4.28 per cent for March has the core element moving at a faster pace. Moreover with the crude oil touching a four year high, the inflation numbers may make the RBI sit up and take a hard look at the interest rates trajectory. That is a worry, even as industrial sentiment looks up.”
Anis Chakravarty, Lead Economist and Partner, Deloitte India said: “We expect that inflation expectations in the period ahead will possibly be shaped by oil price movement, impact of minimum support prices (MSP) inclusion, fiscal slippage as GST collections remain low, and monsoon forecasts.”
Devendra Kumar Pant, Chief Economist, India Ratings and Research said: “The February 2018 IIP growth at 7.1 per cent gives confidence that the industrial recovery is broadening.”
“The broadening of the industrial recovery was supported by positive growth of all six use-based classification of the IIP for four consecutive months. Leading indicators from the IIP data – primary and intermediate goods – indicate that the recovery will strengthen in the coming months.”
“It is after early FY17 that both investment and consumption sectors are part of the industrial recovery, which is also receiving support from infrastructure industries,” Pant said.