NEW DELHI: India’s industrial activity exceeded consensus expectations, rising 1 per cent in December, while retail inflation eased to 4.06 per cent in January within the comfort limit of the government, bringing some relief for the economy after a prolonged period of high inflation.
Last month, the IIP had contracted by 1.9 per cent. Barring September and October, IIP was in the negative zone and it was a reason for concern as it accounts for 40 per cent of the GDP numbers. Experts, however, feel that even when the economy has recovered, the pace has been tepid and below their expectation.
“While the Indian industrial sector expectedly returned to a growth in December, the pace was tepid, and trailed our expectations (+2.2%). Even as many lead indicators have displayed a robust pace of expansion in the recent months, the subdued 1 per cent growth of the IIP in Q3 FY2021 suggests that the recovery in the broader economy remains relatively measured,” said Aditi Nayar, principal economist, ICRA Ratings.
Data released by the National Statistical Office showed that the electricity production continues to make gains (5.1 per cent), the manufacturing sector bounced back to growth territory, rising 1.6 per cent, while mining output remains a sore point, as it continues to contract (-4.8 per cent). Overall, economic activity levels are improving gradually, with most indicators posting modest gains on a quarterly basis.
For the April-December period, IIP contracted 13.5 per cent year-on-year as against 0.3 per cent growth in the same period last year. Meanwhile, Consumer Price Index inflation eased to 4.06 per cent in January — a 16 month low — on account of a decline in vegetable prices. The rate of price rise in the food basket was 1.89 per cent in January, significantly down from 3.41 per cent in December. Inflation peaked to over six-year high at 7.61 in October.
0.6% Capital goods production
4.9% Consumer durables output
0.9% Infrastructure goods output
Prolonged rate pause
Even as inflation eased, the RBI may stick to its accommodative stance, say economists. Sunil Kumar Sinha, principal economist at India Ratings expects RBI to keep the policy rate in a pause mode over the next 6-9 months