IIP At 2%, Retail Inflation At 6.58% In February

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IIP At 2%, Retail Inflation At 6.58% In February
Rajat Mishra - 12 March 2020

Data released by NSO show Index of Industrial Production(IIP) or the factory output grew in at level which is 2 per cent higher than the output in December. IIP or the factory output is one of the most important parameter to know the economic activity in the country.

As per the data released today eleven out of the twenty three industry groups (as per 2-digit level of National Industrial Classification-2008) in the manufacturing sector have shown positive growth during the month of January 2020 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of tobacco products’ has shown the highest positive growth of 22.8 per cent followed by 14.1 per cent in ‘Manufacture of basic metals’ and 9.0 per cent in ‘Manufacture of furniture’. On the other hand, the industry group ‘Printing and reproduction of recorded media’ has shown the highest negative growth of (-) 16.3 per cent followed by (-) 11.6 per cent in ‘Manufacture of computer, electronic and optical products’ and (-) 10.6 per cent in Manufacture of motor vehicles, trailers and semi-trailers.

However, the industrial output contracted by 0.3 per cent in December while retail inflation jumped to a 68-month high of 7.59 per cent in January on high food prices. On the other side, retail inflation in February has plummeted to 6.58 per cent from 7.59 per cent on the account of easing in food prices. But in the same month last year the CPI inflation stood at 2.57 per cent which is far lower than the inflation numbers of January and February. The food inflation in the month of February has come down to1 0.81 per cent from 13.67 per cent in January.

However, it still breaches the comfort zone of RBI to target inflation in their monetary policy meeting as the RBI is mandated to keep retail inflation at around 4 per cent. With the aforementioned retail inflation number, it is now believed that RBI this time will not go for any rate cut in scheduled monetary policy meeting in next month.

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