Industrial growth recovers, CPI inflation up

Food prices show slight increase

Industrial activity rebounded in April 2019 to grow to a six-month high of 3.4%, driven by a turnaround across all the sectors measured, according to official data released on Wednesday.

Separate data release showed retail inflation in May 2019 accelerated marginally to 3.05% driven by a slight rise in food price inflation.

Growth in the Index of Industrial Production (IIP) returned to positive territory in April following a contraction of 0.1% in March. Within the index, growth in the manufacturing sector stood at 2.8% in April compared with a contraction of 0.4% in the previous month. Mining sector saw growth accelerating to 5.1% from 0.8% over the same period.

“The recovery in the IIP is mostly due to the fact that with the new financial year having started, the government might have been able to spend through the approvals of the interim budget,” D.K. Srivastava, chief policy advisor, EY India, said. “Those decisions that were postponed would have been taken up and so, that would have spurred demand. If you look, most of this growth would have been due to public expenditure.”

Election spending

“In April and May, the election spending would have also spurred demand,” Mr. Srivastava added. “And in the first few months of the new financial year, there will likely be front-loading of government expenditure, and so, this growth could continue for about three months.

Retail inflation as measured by the Consumer Price Index (CPI) quickened to a seven-month high of 3.05% in May 2019, up marginally from the 2.99% registered in the previous month. Within the index, inflation in the ‘food and beverages’ segment accelerated to 2.03% from 1.38% over the same period. The fuel and light segment, however, saw inflation easing somewhat to 2.48% in May from 2.56% in the previous month. ‘Pan, tobacco, and other intoxicants’ and the ‘clothing and footwear’ segments, saw inflation easing marginally in May.

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