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Inflation slips to 1-year low, industry grows 4.5 per cent

Inflation fell to one-year low due to lower food prices. Food inflation contracted by 0.86 per cent in October.

New Delhi: Retail inflation has fallen to one-year low of 3.31 per cent in October giving enough leg room to the RBI to push sagging industrial growth by keeping interest rates stable.

According to Central Statistics Office (CSO) data, the country industrial production in September grew at the slowest pace in the last four months at 4.5 per cent, due to poor performance of mining sector and lower offtake of capital goods.

This was a tad lower than an upwardly revised 4.7 per cent year-on-year increase in August.

The industrial production measured in terms of Index of Industrial Production (IIP) was 4.1 per cent in September 2017. The IIP was recorded at 6.9 per cent and 6.5 per cent in June and July this year, respectively. The previous low was recorded at 3.8 per cent in May this year

As there were expectations of RBI raising interest rates in strengthening US dollar, a lower inflation came as a welcome relief. Inflation and foreign investors have inverse relationship as a low inflation and high economic growth would result in a higher inflation-adjusted real return to them.

The inflation-based on the Consumer Price Index (CPI) was 3.7 per cent in September 2018 and 3.58 per cent in October 2017. The retail inflation number is the lowest since September 2017 when it touched 3.28 per cent.

The rate of price rise in the food basket contracted by 0.86 per cent in October compared to 0.51 per cent rise in September, according to the Central Statistics Office data.

Vegetable prices declined by 8.06 per cent in October against a 4.15 per cent contraction in September. Inflation also slowed to 0.35 per cent in the fruit basket as against 1.12 per cent recorded a month ago.

The retail inflation also cooled in protein-rich items like cereals, eggs, milk and related products. However, inflation quickened to 8.55 per cent for the ‘fuel and light’ category against 8.47 per cent in the previous month.

Despite a slowdown in headline industrial growth number, 17 out of 23 industry groups in manufacturing sector have shown positive growth during September 2018 as compared to the corresponding month of the previous year.

The mining sector output growth decelerated to 0.2 per cent in September as against 7.6 per cent in the year-ago month. Similarly, capital goods output growth slowed to 5.8 per cent in the month under review from 8.7 per cent a year ago. However, the data showed that the manufacturing sector recorded a growth of 4.6 per cent in September, up from 3.8 per cent a year ago.

The electricity generation too improved to 8.2 per cent in the month from 3.4 per cent in September 2017. For April-September 2018, the IIP growth came in at 5.1 per cent. The factory output rise was 2.6 per cent in same period of the last fiscal.

As per use-based classification, the growth rates in September 2018 over September 2017 are 2.6 per cent in primary goods, 1.4 per cent in intermediate goods and 9.5 per cent in infrastructure/construction goods. The consumer durables and consumer non-durables have recorded growth of 5.2 per cent and 6.1 per cent, respectively.

( Source : Deccan Chronicle. )
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