Double blow to Indian economy: IIP growth slows to 0.1%; inflation rises to 5.39%

Zee Media Bureau

New Delhi: Dragged by poor manufacturing and mining output, India's industrial production growth slowed to 0.1 percent in March as compared to 2.5 percent during the same month last year, while retail inflation inched up in April to 5.39 percent, a set of data which may spoil the chances for any immediate rate cut by RBI in its next monetary policy review.

Factory output measured in terms of Index of Industrial Production (IIP) had registered a growth of about 2 percent in February this year. For the entire 2015-16 fiscal, the factory output grew at 2.4 percent, down from 2.8 percent in the previous fiscal.

The manufacturing sector, which accounts for over 75 percent of the index, declined by 1.2 percent in March against a growth of 2.7 percent in same month a year ago. The sector has not done well in 2015-16 as it grew by just 2 percent compared to 2.3 percent in previous year.

Mining sector output too contracted by 0.1 percent in March compared to a growth of 1.2 a year ago. In 2015-16, the sector grew at 2.2 percent up from 1.1 percent in previous fiscal.

Capital goods segment, which is a barometer of investment, contracted by 15.4 percent in March as against a growth of 9.1 percent year ago. During 2014-15, the output of these goods also declined by 2.9 percent compared to a growth of 6.3 percent in previous fiscal.

India`s headline inflation broke a recent slowing trend in April, reducing the odds of further interest rate cuts next month by the Reserve Bank of India, even as industrial output expanded at a much-slower-than expected pace in March.

Consumer price inflation, which the Reserve Bank of India (RBI) targets in setting interest rates, rose at a faster-than-expected pace, to 5.39 percent last month, from 4.83 percent in March. It was the first pickup in retail inflation since January.

The pace of price gains in April was driven mainly by higher food costs. An early summer heat wave led to an increase of 3.8 percent in month-on-month prices for staple vegetables .Overall retail food inflation came in at 6.32 percent, compared with 5.21 percent in March.