Output of capital goods segment, a key barometer of investment demand, rose 11.1% in April. Consumer Price Index rose to 5.01% in May, primarily due to high prices of vegetables, pulses and transportation and communication
New Delhi : Showing signs of recovery, factory output rose to a two month high of 4.1 per cent in April driven by manufacturing, but retail inflation too edged up in May amid worries over deficient monsoon.
On Friday, Finance Minister Arun Jaitley said economy was recovering, though he was keeping his fingers crossed about monsoon. As per the data released by the government, factory production measured on Index of Industrial Production (IIP) grew by 4.1 per cent in April as against 3.7 per cent in the year ago period and 2.5 per cent compared with the preceding month.
Manufacturing output, which constitutes over 75 per cent of the index, grew at higher rate of 5.1 per cent in April as against 3 per cent in the same month last year. The output of capital goods segment– a barometer of investment demand–rose 11.1%, up from 8.7% in march, but down from 13.4% a year ago. Among industries, ‘Machinery and equipment’ has shown the highest positive growth of 20.6%, followed by 16.2% in ‘Wood and products of wood’ and 13.4% in ‘Electrical machinery and apparatus’.
Commenting on the data, Saugata Bhattacharya, economist, Axis Bank, said the IIP numbers are better than expected and there is some momentum in capital goods which is coming from the order books of the power sector.
“This trend should be welcomed and is more or less sustainable. Monsoons can be a risk on lowering rural demand. Monsoon and global shocks also pose a risk to CPI and the data is indicating towards a 25 basis points rate cut by the Reserve Bank of India.”
Consumer non-durables goods sector recorded a growth of 4.4% in April, against a contraction of 2.7% a year ago. Within the consumer goods segment, output of consumer durables rose 1.3% in April, compared with a contraction of 7.7% a year ago.
Along with IIP, the Ministry of Statistics & Programme Implementation also issued the data on retail inflation gauzed on Consumer Price Index (CPI).
The CPI, which had dipped to a four month low in April, inched up to 5.01 per cent in May despite drop in rate of price rise in the food basket. Prices of pulses rose by 16.62 per cent in May over the same month last year, the CPI release said.
Within the food group, vegetables inflation moderated to 4.64% from 6.55% in April. However, on a month-on-month basis, the vegetables index rose 1.7% in May.
The Reserve Bank of India, which uses CPI inflation as its monetary policy anchor, is targeting inflation of 6% by January 2016 and 4% by end of 2017-18.
On Tuesday, the government had announced to import pulses to check rising price of pulses. Ratings agency ICRA said: “The marginal uptick in CPI…is in line with our expectations, given the considerable upward revision in fuel prices during that month. “Following the rate cut in the June…we expect an extended pause until the extent of the monsoon shortfall and its impact on food inflation become clear.”
The Reserve Bank, which tracks retail inflation as a benchmark for its monetary policy, earlier this month said that price rise was still a worry for the bank as it expects inflation to rise to 6 per cent by January.
Observing that the economy is recovering from the serious challenges it has faced in past few years, Jaitley said, “We can take some satisfaction of the fact that even though international agencies are rating us as perhaps the fastest growing among emerging economies, but our own level of ambition is higher.” He said the basic fiscal data looks good and the economy is on a roadmap for much higher growth.
In April this year, mining sector too grew at a slower rate. The growth was 0.6 per cent as against 1.7 per cent in April last year. On the other hand, electricity output contracted by 0.5 per cent, while it had expanded by 11.9 per cent April 2014.
