Industry recovers, inflation rises

In an improvement in the economic outlook, India’s industrial production saw a revival in November, growing at a five-month high of 3.8 per cent and retail inflation rose slower than expected by the market.

The retail inflation, based on consumer price index (CPI) rose marginally to 5 per cent in December from 4.38 per cent in November due to increase in the prices of some food items.

However, the core inflation fell to 5.2 per cent an indication of subdued demand pressure. This has raised some hope that RBI may cut interest rates in February before the Union Budget to revive India’s growth story.

Industrial production growth had nose-dived in October contracting by 4.2 per cent. This had raised concerns about revival of the Indian economy. As per the data, the manufacturing sector also saw a revival growing by three per cent in November agai-nst a contraction of 2.6 in the same month in 2014. Mining sector grew by 3.4 per cent in November, compared to a growth of 1.6 per cent last year in the same month.

However, consumer durables contracted by 14.5 per cent in Novem-ber, which shows that consumer sentiments has still not revived. Due to the withdrawal of excise duty on cars and consumer durables from January 1, it would be a challenge to review the auto sector as well.

“IIP registering growth of 3.8 per cent was clearly a positive sign, however, we have our doubts if this momentum can be sustained in the near future. Consumer demand is yet to see any meaningful pick up as consumer durables production continued to contract,” said Anis Chakravarty, senior director, Deloitte India. He said that industrial production is likely to grow in single digits.