Despite being the fastest growing economy with high forex reserves and good foreign investments, pain points still continue.
Industry: Industrial growth yet to stablise, says Ind-Ra
Rating agency India Ratings (Ind-Ra) on Thursday said that the latest Index of Industrial Production (IIP) and consumer price index (CPI) data indicate that the challenges for the economy are still very much intact. Even though the IIP has turned positive, the volatility in IIP data indicates that the industrial growth has not stabilised and will remain so in the foreseeable future. The growth in IIP is not showing any relationship with infra data. While basic and intermediate goods have registered positive growth rates, there is no correlation with other used-based sectors in the economy, it said.
On the other hand, retail inflation, particularly food inflation is gaining further ground as the cereals inflation has firmed up above three per cent after a gap of 16 months. India Ratings believes upside pressure from food inflation will remain a matter of concern as policy makers and the government cannot do much to control the prices of agricultural commodities such as pulses, etc.
Industrial production increased 1.2 per cent year on year (YoY) in May 2016 against a contraction of 1.3 per cent in the previous month. The growth in factory output was primarily led by positive growth in the manufacturing sector. Manufacturing output, which has a weightage of 75.5 per cent in IIP increased 0.7 per cent YoY in May 2016 after two consecutive months of negative growth. However at the used based level, it pointed out that the capital goods output continued its negative trend although it moderated from the previous month. Capital goods output contracted 12.4 per cent YoY in May 2016 against a contraction of 25 per cent in April 2016.
Infrastructure: Cost overrun in 241 projects hit Rs 1.5 Lakh crore
As many as 241 infrastructure projects including those delayed due to land acquisition, forest clearances and other reasons, have led to cost overrun of Rs 1.55 lakh crore, as per official data. The statistics ministry monitored 1,076 infra projects, each worth Rs 150 crore or more across sectors such as power, railways and roads in March, 2016.
It said six projects were ahead of schedule, 258 were on schedule, 343 got delayed, 241 reported cost overrun, and 83 projects reported both time and cost overrun with respect to their original project implementation schedules. “Total original cost of implementation of the 1,076 projects was Rs 12.38 lakh crore and their anticipated completion cost is likely to be Rs 13.93 lakh crore, which reflects overall cost overruns of Rs 1.55 lakh crore (12.52 per cent of original cost),” said a project monitoring report for March.
As per the report, the expenditure incurred on these projects till March 2016 is Rs 5.75 lakh crore which is 41.31 per cent of the anticipated cost of the projects. However, it stated that the number of delayed projects decreases to 304 if delay is calculated on the basis of latest schedule of completion.
Inflation: Wholesale prices up for 3rd month
Costlier vegetables, pulses and sugar pushed WPI inflation for the third straight month in June to 1.62 per cent, queering the pitch for the RBI to reduce rates in its August policy meet. The wholesale price-based inflation, reflecting the annual rate of price rise, during June was also substantially higher than 0.79 per cent in May and (-)2.13 per cent in June 2015.
Wholesale price index (WPI) inflation in vegetables shot up by 16.91 per cent last month. While, inflation for cereals stood at 6.32 per cent. Potato turned pretty costly during the month as buyers had to shell out 64.48 per cent more than a year ago. Overall food inflation was at 8.18 per cent, showed the data released by the commerce ministry. Among manufactured articles, the wholesale inflation print read at 1.17 per cent in June and that for edible oils it firmed up by 3.42 per cent.
