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Recovery cue in economy data

New Delhi: The economy seems to be getting back its vigour with factories growing at a fast clip in December and retail prices rising at a slower pace in January than last month.

Retail inflation eased in January to 5.07 per cent - after touching a 17-month high of 5.21 per cent in December - as food price rise showed some moderation.

The Index of Industrial Production (IIP) showed the growth of 7.1 per cent in December was mainly on account of an uptick in the manufacturing sector, which constitutes 77.63 per cent of the index. It grew 8.4 per cent in December last year compared with just 0.6 per cent in December 2016.

Capital goods, a barometer of investments, showed a sharp increase in output by 16.4 per cent in December against a decline of 6.2 per cent a year ago.

The IIP had grown at 2.4 per cent in December 2016. The growth for November 2017 was revised upwards to 8.8 per cent from provisional estimates of 8.4 per cent released last month.

Assocham said the domestic market would be the driving force in the coming months.

"While the IIP growth eased sequentially in December 2017 and was modestly lower than our expectation (8.0 per cent), it nevertheless remained healthy at 7.1 per cent, benefitting from the favourable base effect that contributed to a double-digit growth of capital goods and consumer non-durables," Aditi Nayar, principal economist with Icra, said.

However, it is "somewhat premature" to attribute the recent double-digit growth in capital goods to a pick-up in investment activity.

Retail inflation

Based on Consumer Price Index (CPI), retail inflation in January was down marginally at 5.07 per cent compared with 3.17 per cent a year ago.

The consumer food basket inflation eased a little to 4.7 per cent in January. Inflation in the vegetable segment slowed to 26.97 per cent. Prices of fruits, too, rose at a lower pace of 6.24 per cent last month.

For the fuel and light segment, inflation was 7.73 per cent last month.

"The continued correction in prices of vegetables would dampen food and headline inflation in the ongoing month.

"It remains unclear if the recent dip in crude prices will sustain going forward. Overall, we expect CPI inflation to dip in February-March 2018, before rising in Q1 2018-19," Nayar said.

"The numbers are along RBI's revised projections, with the next six months to stay firm on arithmetic terms due to base effects," Radhika Rao, India economist at DBS Bank, said.

Business confidence

The Business Confidence Index rose 9.1 per cent in the December quarter 2017 over the previous three months as overall sentiment remained buoyant, a survey by the NCAER said on Monday.

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