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Inflation at a 5-month high, rate cut unlikely

Growth in IIP, but only 1.2 per cent.

New Delhi: India’s industrial production saw an anaemic growth of 1.2 per cent in July as manufacturing was hit by GST jitters. Worse, retail inflation rose more than expected to a five-month high in August, fuelled by strong gains in food prices.

The inflation based on the consumer price index rose to 3.36 per cent in August, up from 2.36 per cent in July. This rise may deter the Reserve Bank from any further cut in interest rates, that would have given a boost to industrial production.

However, industrial production in July was better than June, when it declined by 0.2 per cent.

The manufacturing sector grew by just 0.1 per cent in July, against 5.3 per cent in the same period in 2016. The output of capital goods (infrastructure investments) fell one per cent in July, against a 8.8 per cent growth a year ago. Consumer durables faced a similar fate, with production falling 1.3 per cent, against a nominal growth of 0.2 per cent a year ago. However, electricity generation stood out as it posted a growth of 6.5 per cent in July, up from 2.1 per cent in July 2016. Mining output too expanded by 4.8 per cent, against 0.9 per cent a year ago.

As per inflation data, food inflation in August moved up to 1.52 per cent. Daily consumables like fruits and vegetables turned costlier, with inflation at 5.29 per cent and 6.16 per cent respectively, against 2.83 per cent and minus 3.57 per cent in July, according to Central Statistics Off-ice data.

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