Industrial activity rebounded in July to 4.3% on a broad-based recovery across key sectors such as mining, manufacturing and construction, official data released on Thursday showed.
In a separate release, data showed retail inflation rose in August to hit a 10-month high of 3.21% on quickening food price rises.
Growth in the Index of Industrial Production (IIP) accelerated in July after a slump in June when it touched 1.17%. Within the index, the mining sector accelerated to 4.92% in July compared with 1.53% in June. The manufacturing sector, similarly, saw growth quicken to 4.15% from 0.23% over the same period.
“The numbers provide some positive news for the output scenario because most of the IIP indicators show an uplift,” said D.K. Srivastava, chief policy adviser, EY India. “The only issue is to see if this will be sustained. This has come as a positive surprise because the general trend indicates a slowdown momentum.”
Construction and infrastructure sector saw a turnaround in July, growing 2.13% after contracting 1.9% in the previous month. On the consumer side, the consumer durables sector reined in its contraction, contracting 2.7% in July compared with a steep contraction of 10.2% in the previous month. Consumer non-durables saw growth accelerating to 8.29% from 7.08%. The electricity sector, however, saw growth slowing in July to 4.75% from 8.19% in June.
“Industrial output is likely to improve further in the coming month supported by higher festive and rural demand (with improvements in the monsoons),” Care Ratings said in a report.
Rising inflation
Growth in the Consumer Price Index (CPI) touched 3.21% in August, compared with 3.15% in July. Within the index, inflation in the food category touched a 14-month high of 2.96% in August, up from 2.33% in the previous month.
“Inflation overall is only marginally higher over last month,” Mr. Srivastava said. “Only vegetable and food price inflation have gone up and that is due to the seasonal effect. This usually happens in monsoon months.”
Inflation in the pan, tobacco and other intoxicants category quickened marginally to 5% in July from 4.89% in the previous month. Clothing and footwear category, however, saw inflation easing somewhat to 1.23% from 1.37% over the same period.
The housing sector saw the rate of inflation remain flat at 4.84% in July, compared with 4.87% in June. The fuel and light sector saw a contraction in prices by 1.7% compared with a contraction of 0.29%.
“Consumer price inflation is likely to inch up further in the coming months with the waning of the base effect and seasonal factors,” Care Ratings added. “Although the RBI is likely to continue with its monetary easing, we do not expect a rate cut at the next monetary policy.
“The RBI is likely to look for the transmission of the previous rate cuts with the introduction of the new external benchmark before cutting rates further,” the ratings agency added. “For the remainder of the financial year, we expect policy rates to be cut by another 40 bps.”
Published - September 12, 2019 10:34 pm IST
