IIP slows down to 2.6 per cent as inflation moves up to 5.37 per cent

New Delhi: India’s industrial production growth slowed down in January to 2.6 per cent, even as inflation moved up. The retail inflation, based on the consumer price index (CPI), rose in February for the third straight month, to 5.37 per cent driven by food prices.

This shows the challenge for the RBI as rise in inflation will make it difficult for it to cut interest rates to boost economy. Industrial production in December had grown by 3.2 per cent.

The prices of vegetables rose by 13 per cent and pulses by 10 per cent in February whilst milk products and spices were also costlier by 9 per cent. However, core inflation edged down for the seventh consecutive month.

“Untimely rains in recent days have adversely impacted Rabi crops in the north and central India. As a result, inflation might inch higher or remain close to current levels in the coming months. In addition, increase in freight charges and petrol and diesel prices might reduce the benefit from lower transport and communication inflation,” said rating agency Crisil.

However for 2015-16, it expects inflation to average at 5.8 per cent supported by lower oil prices and better monetary and fiscal co-ordination.