New Delhi, Feb 12 (IANS) India’s economic health showed signs of further deterioration as factory production dwindled in December, while the country’s January retail inflation remained at an elevated level with a marginal rise.

The decline in manufacturing activity contracted India’s December factory output by 0.3 per cent, from a rise of 1.82 per cent in November and of 2.5 per cent during the corresponding period of the previous year.

“The ‘Quick Estimates of Index of Industrial Production’ with base 2011-12 for the month of December 2019 stands at 133.5, which is 0.3 per cent lower as compared to the level in the month of December 2018,” the Statistics Ministry said in a statement.

“The cumulative growth for the period April-December 2019 over the corresponding period of the previous year stands at 0.5 per cent,” it said.

The data showed that the output rate of the manufacturing sector contracted by minus 1.2 per cent in December from a year-on-year (YoY) rise of 2.9 per cent.

The data showed that mining activity grew by 5.4 per cent from a YoY decline of minus 1 per cent and the sub-index of electricity generation was again lower by minus 1 per cent from a rise of 4.5 per cent.

“The loss of momentum in December 2019 relative to the previous month was primarily led by capital goods, consumer durables and non-durables, and intermediates,” said Aditi Nayar, Principal Economist, ICRA.

According to M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings: “Despite the negative IIP growth, if the recent revival in eight core activities and PMI manufacturing index sustains, we can expect some improvement in the industrial activity in the last quarter of the current fiscal.”

In terms of retail inflation, a different set of data, showed a marginal rise in January to 7.59 per cent from December’s 7.35 per cent.

The consumer price index (CPI), or retail inflation, was at 1.97 per cent in the corresponding month of last year.

Economy watchers cited higher prices of food items such as vegetables, eggs, meat and fish, along with that of fuel, as having pushed India’s retail inflation higher during January.

National Statistical Office data pointed out that consumer food price index remained at an elevated levels of 13.63 per cent, up from minus 2.24 per cent recorded in January 2019.

Similarly, high fuel prices lifted the inflation rate of the ‘fuel and light’ category to 3.66 per cent.

The data showed that the retail inflation level continues to remain much above the RBI’s medium-term target for the CPI rate of 4 per cent with a band of +/- 2 per cent.

Product-wise, prices of vegetables, eggs, meat, fish and pulses pushed the retail inflation higher on a year-on-year (YoY) basis.

Prices of vegetables in January increased 50.19 per cent, meat and fish by 10.50 per cent, eggs by 10.41 per cent and pulses and their products by 16.71 per cent.

“Due to higher inflation, RBI has been maintaining a status quo since December 2019. If inflation continues to hover above 6 per cent, we don’t expect RBI to cut its interest rate or change its accommodative policy stance,” said Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services.

In addition, Rajani Sinha, Chief Economist and Head of Research at Knight Frank India said: “CPI inflation has surged further mainly due to spike in food prices and telecom tariff hike. This is the second consecutive month of inflation above RBI’s upper target of 6 per cent. Sustained high food inflation could result in inflationary expectations rebounding and RBI would be wary of that.”

–IANS

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