Industrial activity accelerated in January to 7.5% on the back of strong manufacturing growth and a rebound in the consumer durables sector, according to official data released on Monday.
Retail inflation, as measured by the Consumer Price Index (CPI), eased to 4.4% in February, following two months of figures above 5%.
Growth in the Index of Industrial Production quickened to 7.5% in January from 7.07% in December. The manufacturing sector saw growth quickening marginally to 8.7% in January from 8.4% in the previous month.
Electricity also saw growth accelerating to 7.6% from 4.43% in December.
“IIP growth appears to be firming up and it is confirmation of the ongoing recovery of the economy,” D.K. Srivastava, chief policy adviser at EY India said. “The government demand picked up post last year’s Budget and it is now having an effect on infrastructure and primary goods.” Primary goods saw growth accelerating to 5.8% in January from 3.73% in December. The capital goods sector continued to witness strong growth of 14.6% in January, although this was lower than the 16.44% seen in the previous month.
Growth in infrastructure and construction quickened slightly to 6.8% in January from 6.68% in the previous month. The consumer durables sector saw growth accelerating sharply to 8% from 0.86% over the same period.
‘PMI data mismatch’
“The only concern is that the Purchasing Managers’ Index data for February showed a weakening so one has to wait and watch,” Mr. Srivastava said.
“One reason for the growth in the consumer durables sector is the statistical reason of a low base effect,” Madan Sabnavis, chief economist at CARE Ratings said. “On the other hand, what happened with GST was that there was a major amount of de-stocking that happened in Q1. And that is being made up in Q2, Q3, and Q4. Now, we haven’t seen this happening in consumer durables all this while, so I would look at it more in terms of preparing for the new season and the fact that whatever inventories were there have been exhausted.”
Inflation as measured by the CPI slowed to 4.44% in February from 5.07% in January, mostly due to easing food and fuel prices.
Inflation in the food and beverages segment slowed to 3.38% in February from 4.58% in the previous month. Similarly, inflation in the fuel and light segment slowed to 6.8% from 7.73% over the same period.
‘One-off seasonal factor’
“This easing appears to have come largely on the back of a slowdown in the food price inflation on account of one-off seasonal factors,” Richa Gupta, senior economist and senior director, Deloitte India said.
“Whether this easing sustains or not depends on multiple factors, including the agricultural production as well as the threat of rising crude oil prices on the back of further output cuts.
“Hence, it can be expected that RBI may not dilute its position on expected inflationary risks and is likely to maintain status quo during the April monetary policy.”
