New Delhi, March 12: The economy is showing faint signs of recovery with a slight expansion in industrial production and further cooling of consumer prices. Industrial output entered the positive territory with a 0.1 per cent growth in January after three months of decline, while consumer price inflation dipped to a 25-month low of 8.1 per cent in February helped by moderating food prices.
“The IIP data is in line with expectations. There is need for considerable pick up in February-March manufacturing activities,” C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said.
However, industry growth for the April-January period of this financial year remained stagnant compared with an over 1 per cent growth in the same period of 2012-13.
The contraction in IIP in December has been revised to 0.16 per cent from the provisional estimate of a dip of 0.6 per cent. Factory output contracted 1.6 per cent in October followed by a decline of 1.3 per cent in November. In January 2013, industrial output grew 2.5 per cent.
The marginal improvement in the index of industrial production (IIP) was mainly on account of higher power generation and mining output even as manufacturing declined.
“The marginally positive IIP growth for January 2014 does not provide much comfort, given that both capital goods and consumer durables have contracted for yet another month. Moreover, the improved performance of consumer non-durables in January is supported by high growth in items such as vitamins and cashew kernels, which are not indicators of a pick-up in domestic consumption,” Aditi Nayar, senior economist with Icra, said.
Chandrajit Banerjee, director-general of CII, said, “This is a small consolation considering that the manufacturing sector continues to be in the red for the fourth consecutive month, indicating the slowdown is yet to show any visible sign of bottoming out.”
The dip in retail inflation, aided by easing onion and potato prices, is likely to increase the clamour for a rate cut by the RBI in its next monetary policy.
Overall inflation in the food basket, including beverages, slowed to 8.57 per cent in February from 9.9 per cent in the previous month. The rate at which vegetable prices increased eased to 14.04 per cent against 21.91 per cent in January. However, the recent hail and heavy rainfall that have damaged crops in many regions may cause a fresh price spike.