November IIP growth jumps to 17-month high; Dec inflation rises to 5.2%
India’s industrial output growth and headline retail inflation registered the highest growth since July 2016, in what was among the last crucial set of economic data before the Union Budget 2018-19. Data released on Friday showed that the Index of Industrial Production (IIP), after slowing for two straight months, bounced back in November, rising by 8.4% and signalling that industrial revival was back on track. Meanwhile Consumer Price Index(CPI)-based inflation for December rose by 5.21%, compared with 4.88% in November and 3.41% in December 2016. The divergent trends, with robust industrial data and high inflation numbers, indicate that the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) may not go for an interest rate cut in the foreseeable future, with some analysts indicating there could even be a rate hike. “A rate cut by the RBI can be ruled out; and based on the trajectory in the next few months, a rate hike could be the next rate action. But it would be status quo in February,” said Madan Sabnavis, chief economist, CARE Ratings. Finance Minister Arun Jaitley presents the 2018-19 Budget on February 1. The only two major datasets yet to be released by the Centre are monthly wholesale inflation and trade data. The IIP growth “has been driven by a combination of restocking by companies and a more vibrant demand in certain sections,” Sabnavis said. He added that the cumulative IIP growth for this fiscal year is now at 3.2%, compared with the same period last year. Sabnavis expects the IIP growth for the year at 4.5%. The IIP growth in November was fuelled by a 10.2% rise in the manufacturing sector from the low 2.2% in October. The manufacturing sector constitutes more than three-fourth of the IIP. However, within the manufacturing segment, 15 of the 23 sub-groups recorded a contraction, compared to 13 in the previous month. Before this, industrial production growth in the country had slowed to a revised 1.99% in October, from the 4.1% in September, after rising to a nine-month high of 4.5% in August. In November, the other major sub-sectors of electricity and mining rose by 3.9% and 1.1%, respectively.
Capital goods production showed a rising trend for the fourth straight month. Its growth rate rose to a high 9.4%, from the 6.5% rise seen in the previous month of October.