Factory output nearly stagnates; inflation climbs

financial chronicle

Business, Economy

IIP growth for November 2018 was revised downwards to 0.2 per cent from 0.3 per cent earlier.

consumer inflation (Representational Image)

New Delhi: Industrial output growth slowed to a 20-month low of 0.1 per cent in February, mainly on contraction in the manufacturing sector while retail inflation increased to 2.86 per cent in March from 2.57 per cent in February this year, according to government data released on Friday.

The Index of Industrial Production, or IIP, almost showed a flat growth in February, adding to a host of indicators now pointing to weakening economic momentum. The IIP rose a mere 0.1 per cent in February compared with a growth of 1.7 per cent in January and 6.9 per cent a year ago.

The near stagnation in industrial production complements other signals of weakness in the economy. For instance, import demand for consumer items has weakened in recent months and the Purchasing Managers’ Index has also fallen.

While the RBI has projected GDP growth at 7.2 per cent in FY20 compared to 7 per cent in FY19, some analysts believe the forecast may prove optimistic. In order to support economic growth and private investment, the monetary policy panel has cut interest rates by 50 bps since the start of this calendar year.

IIP growth for November 2018 was revised downwards to 0.2 per cent from 0.3 per cent earlier. The previous low in IIP growth was recorded in June 2017, when factory output contracted 0.3 per cent.

The manufacturing sector contracted by 0.3 per cent in February against an expansion of 8.4 per cent a year ago. Also, the capital goods output declined by 8.8 per cent in February 2019 against 16.6 per cent growth in February 2018.

As far as retail inflation is concerned, the official data also pointed out that it has remained within the central bank’s medium-term target for the eighth month in a row. The RBI has set a medium-term target of 4 per cent for consumer inflation, which is determined by Consumer Price Index parameter.