Inflation Down, Industrial Output Grew by 7.1% : Signs of Economic Recovery

As the recovery momentum is seen in some key segments, industrial output grew by 7.1 percent in the December month on the back of robust performance by sectors such as manufacturing, capital goods and non-durable consumer goods.

Similarly, country's retail inflation also declined to 5.07 percent in January marginally, due to easing prices of vegetables, fruits and fuel components, according to a Government official data released.

With the data, India Inc, however, feels that the country’s economic situation will remain under pressure in the near future due to global factors. “Risks to the Indian economy continue 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.

Principal Economist with ICRA Aditi Nayar also opined that it remains ‘somewhat premature’ to attribute the recent double-digit growth in capital goods to a pickup in investment activity.

The Index of Industrial Production or IIP had grown at 2.4 percent in December 2016, while for the month of November 2017, it was revised upwards to 8.8 percent from provisional estimates of 8.4 percent released last month.

“The IIP growth in December was mainly on account of an uptick in the manufacturing sector which constitutes 77.63 percent of the index,” the data released by the Central Statistics Office (CSO) showed, adding that it also grew by 8.4 percent during the month as compared to just 0.6 percent in December 2016.

“The capital goods, a barometer of investments, showed a sharp increase in output by 16.4 percent in December 2017 as against a decline of 6.2 percent a year ago. The consumer non-durables, which are mainly fast moving consumer goods, too showed an increase of 16.5 percent as against a contraction of 0.2 percent,” it said.

As far as retail inflation is concerned, it also little cheered the common man by declining to marginal 5.07 percent in January. The fall was mainly due to easing prices of vegetables, fruits and fuel components.

Based on Consumer price index (CPI), the inflation was at 5.21 percent in December — a 17-month high, and 3.17 percent in January last year. The data also showed that the rate of price rise for consumer foods eased to 4.7 percent in January, from 4.96 percent in December.

“Inflation in the vegetable basket slowed to 26.97 percent as against 29.13 in December. Prices of fruits too rose at a slower pace of 6.24 percent last month, as against 6.63 percent recorded in the preceding month,” it said.

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