Industrial output fell 2.6% in September

Retail inflation up a little to 4.48% in October

November 12, 2021 06:02 pm | Updated 11:12 pm IST - New Delhi

Tomatoes, a staple vegetable in kitchens, have seen a sharp increase in Bengaluru. File

Tomatoes, a staple vegetable in kitchens, have seen a sharp increase in Bengaluru. File

India’s industrial output fell 2.6% month-on-month in September even as retail inflation inched up marginally to 4.48% in October with a sharper rise in urban price trends, as per data from the National Statistical Office.

Compared to September 2020, the Index of Industrial Production (IIP) grew 3.1% in this year September, the pace of growth dipping sharply from the 12% recorded in August.

Industry blamed the moderation in industrial output to supply side constraints caused by the shortages of raw materials and spiralling commodity prices. "High commodity prices and shortages of raw materials are impacting the production and overall growth of the IIP," said PHD Chamber of Commerce and Industry president Pradeep Multani, adding that input prices may subside a bit due to the fuel tax cuts.

While the sharp deceleration in IIP growth was mainly because of the base effect, the sequential decline was a cause of concern, said Rajani Sinha, chief economist at Knight Frank India. “For sustainable economic momentum in 2022, the critical driver would be boost to consumer spending through demand stimulating government policies,” she noted.

Deloitte India economist Rumki Majumdar stated, “Activity in the infrastructure and construction has come down, which may not bode well for rural demand and the externality effects associated with this sector.”

Although Consumer Price inflation moved nominally to 4.48% in October from 4.35% in September, urban parts of the country experienced a steeper bounce from 4.57% to 5.04% in October.

Food prices at the consumer level recorded an inflation of 0.85% in October, marginally higher than 0.68% the previous month but urban consumers experienced a higher inflation of 1.72%.

However, inflation in oil and fats remained high at 33.5% in October, while transport and communication inflation stood at 10.9%.

Spike in vegetable prices

“The sharp month-on-month rise of 2.3% in the food and beverages index was driven by the 14.2% spike in vegetable prices, a trend which is expected to persist in the ongoing month with the further rise in the prices of staples such as potatoes, onions and tomatoes,” said ICRA chief economist Aditi Nayar, adding that the fuel tax cuts announced recently may soften the November inflation print.

Automobile manufacturing fell 9% in September from a year ago. Sequentially also, auto production slid for the second month in a row, declining 3.3% over August output, as per the IIP, possibly due to persisting chip shortages.

Mining output increased 8.6% year-on-year, while manufacturing and electricity generation recorded a moderate 2.7% and 0.9% uptick, compared to September 2020.

Consumer durables’ production fell 2% in September from a year ago, but was 6.67% higher than August. Production of consumer non-durables, however, recorded a 0.5% fall year-on-year, and was also 0.88% below this August’s level.

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