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India’s retail inflation down, factory output up

AutomobileNew Delhi:(IANS) In a twin-cheer for stakeholders, India’s annual retail inflation rate fell significantly to 3.78 percent in July, even as factory output, that has bee stuttering for some months, rose slightly to 3.8 percent in June, official data showed on Wednesday.

The annual retail inflation and month-on-month factory output were at 5.4 percent in June and 2.7 percent in May, respectively.

What should please India Inc is the growth in factory output was led by the manufacturing sector, which expanded by 4.6 percent in June, against 2.2 percent in the month before. While the output for mining sector fell 0.3 percent, that for electricity rose by only 1.3 percent.

In the case of retail inflation, even as prices of onions and pulses have been skyrocketing, the rise in the sub-index of food items was lower at 2.15 percent in July, as opposed to 5.48 percent in the month before.

The official data on combined Consumer Price Index (CPI) for rural and urban areas, as also the index of industrial production (IIP), was released by the Ministry of Statistics and Programme Implementation on Wednesday evening.

Within the consumer price data, there remained some areas of concern. The prices of pulses, for example were higher by 22.88 percent in June, while for spices and meat products, they were up by 7.02 percent on a year-on-year (YoY) basis. Vegetables, though, were cheaper by 7.93 percent.

Prices of other protein based food items like milk and milk based products became dearer by 6.12 percent. Eggs cost rose by 2.80 percent.

However, sugar and confectionery costs came down by 12.30 percent in the month under review on a YoY basis.

Fuel and light products which constitutes 6.84 percent of the CPI grew by 5.36 percent in July.

The rural-urban divide was also evident, with the overall retail inflation showing a significant disparity, at 4.44 percent and 2.94 percent, respectively in July. The annual inflation rates in the month before were again uneven at 6.07 percent in rural and 4.55 percent in urban areas.

This divide was also reflected, ableit inversely, in the prices of pulses — up 32.18 percent in urban areas and relatively lower at 18.20 percent in the rural areas.

On the IIP side, the cumulative growth for the first three months of this fiscal was 3.2 percent.

“In terms of industries, 16 out of the 22 industry groups in the manufacturing sector have shown positive growth during the month of June 2015 as compared to the corresponding month of the previous year,” an official statement said.

Going into further classification, the industrial growth in June 2015 was 5.1 percent in basic goods, 0.8 percent in intermediate goods and 6.6 percent in consumer goods sub-indices.

The consumer durables sub-category grew by 16 percent, while consumer non-durables segment inched-up by 1.3 percent. But outputs of capital goods declined by 3.6 percent.

According to the data, items showing high positive growth during the month under review were gems and jewellery (157 percent), woollen carpets (97 percent), wood furniture (63.5 percent), transformers (52 percent), pens (34 percent), apparels (29 percent) and carbon steel (24 percent) and leather garments (22 percent).

Items showing high negative growth were: ready to eat food (-43 percent), grinding wheels (-35.5 percent), cables (-28 percent), aerated water and soft drinks (-26 percent), tractors (-23.4 percent) and furnace oil (-22.5 percent).

Indian industry commented that the manufacturing sector growth is picking up as investors have reposed faith in the Indian economy and it’s potential.

“There are visible signs of growth in manufacturing and we hope that this momentum could be sustained,” said Jyotsna Suri, president of Federation of Indian Chambers of Commerce and Industry (FICCI).

However, Suri cautioned that the turnaround in investments will take some more time and that the government’s efforts should be focused to expedite infrastructure projects and to provide a more simplified business environment.

India Inc. also pointed out the steep decline in the output of the capital goods sector which has slipped to the negative territory after showing positive growth over the last few months.

“This indicates that new investments are still not happening and the firming up of the investment cycle is still some distance away.  The subdued growth of mining and electricity sector is also disconcerting,” said Chandrajit Banerjee, director general of CII.

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