Thursday, May 12th, 2016

India’s factory output growth turns flat in March

Narada Desk | May 12, 2016 10:08 pm Print
As for annual retail inflation, based on consumer price index (CPI), the rise came after two straight months of decline.
Indian industries statistics, index of industrial production

India’s factory output growth turned flat in March after rising during the month before, even as the annual retail inflation for April rose to 5.39 percent from 4.83 percent in March, official data showed on Thursday, even as India Inc renewed calls for more government spending and further reforms.

The factory output for February, based on the index of industrial production (IIP), which had turned positive at 2 percent, after two straight months of decline, rose negligibly by 0.1 percent in March, as per data released by the Central Statistics Office.

As for annual retail inflation, based on consumer price index (CPI), the rise came after two straight months of decline. The inflation rates for the preceding three months were 4.83 percent for March, 5.26 percent for February and 5.69 percent for January.

At the same time, the annual food inflation rose sharply to 6.32 percent from 5.21 percent. This apart, the annual retail inflation in the rural economy was relatively higher at 6.09 percent, against 4.68 percent in the urban areas.

Worryingly for industry, the index for manufacturing, which has the maximum weight in the overall IIP, actually fell by 1.2 percent in the month under review. While the index for mining also fell, albeit marginally by 0.1 percent, that for electricity grew by a robust 11.3 percent.

Around the same time last month, there was much to cheer as official data forecast the rains during the upcoming monsoon season to be above normal, and that retail inflation fell to a six-month low while factory output rose after three months of decline.

The IIP data revealed that among the six use-based classifications of the index, the output of consumer durables segment expanded by 8.7 percent in March, whereas the consumer non-durables segment reported a negative growth of 4.4 percent.

The total consumer goods segment was marginally up by 0.4 percent.

However, capital goods segment, which is a key indicator of economic activity plunged by minus 15.4 percent.

The basic and intermediate goods’ output inched-up by 4 percent and 3.7 percent, respectively.

Overall, only 12 out of the 22 industry groups in the manufacturing sector have shown positive growth during the month under review.

The retail inflation was mainly driven up by higher food costs in April. The inflation in food and beverages during the month under review rose by 6.21 percent.

The official data showed that prices of pulses were up 34.13 percent over those prevailing during the past year. Cost of sugar and confectionery edged-up by 11.18 percent on a year-on-year (YoY) basis.

Prices of spices were up by 9.80 percent. Protein-based food items like meat and fish became expensive by 8.07 percent. Eggs’ cost rose by 6.64 percent.

Reacting to the “disappointing” data, India Inc renewed calls for government spending to stimulate demand and for deepening the reform process.

“Its important that the government holistically addresses the issues related to manufacturing by a high level institutional mechanism involving all departments and states,” Harshavardhan Neotia, president of industry chamber FICCI said in a statement here.

“The growth in manufacturing for the last year is disappointing and emphasizes the need for more deep-rooted reforms for the sector to make its growth sustainable in the long run,” he added.

“Overall, the big picture looks far more difficult making it imperative for the government to bring in policy reforms and demand push measures,” said industry chamber Assocham president Sunil Kanoria in a statement.

“The government must also front-load its capital expenditure for the fiscal 2016-17 to stimulate the economy,” he added.

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