However, experts doubtful whether IIP uptick would sustain in September; Also expected CPI to move up soon
The country’s factory output recorded a nine-month high growth of 4.3% in August thanks to the robust performance of mining and electricity sectors as well as capital goods, according to data released by the statistics ministry on Thursday. However, experts are doubtful whether the uptick would sustain in September.
Meanwhile, beating expectations retail inflation remained flat at 3.28% in September, following the August numbers being revised to 3.28% from the earlier projected 3.36%. However, economists expect retail inflation to rise soon.
On the industrial output measured in terms of Index of Industrial Production (IIP), Aditi Nayar, Principal Economist, ICRA Limited, said in a statement that “On a cautious note, this uptick in industrial growth may not sustain in September 2017, with the early indicators for industrial production in the organised sectors, namely, automobiles, coal and electricity generation, revealing some moderation in the pace of expansion from the spikes recorded in August 2017.” Also, given the somewhat unfavourable base effect, the IIP growth is expected to ease in September 2017 relative to print of 5% in September 2016, she said. The IIP in August 2016 had registered a 4% growth, while the previous high was 5.7% in November 2016.
Ms. Nayar said appreciable strengthening of the industrial growth in August 2017 from the mild 0.94% in July 2017 was on expected lines, as restocking of manufactured items gained steam following the introduction of the GST and prior to the festive season. Moreover, mining and electricity sectors recorded healthy performances on the back of coal and thermal electricity. She added, “Encouragingly, the sequential improvement in industrial growth in August 2017 was broad-based, led by all three sectors (mining, manufacturing and electricity) and five of the six use-based industries (except infrastructure/construction goods). However, 13 of the 23 sub-sectors of manufacturing with a weight of 27% in the IIP, recorded a contraction in August 2017.”
IIP growth slowed down to 2.2% during April-August this fiscal from 5.9% in the corresponding period last fiscal. The IIP growth in July was revised to 0.94% from 1.2% in the provisional estimates released last month.
On the retail inflation measured in terms of Consumer Price Index (CPI), Madan Sabnavis, Chief Economist, CARE Ratings Ltd, said in a statement that “inflation came down to 3.3% contrary to our own expectations of 3.9%. This is a good sign that notwithstanding the expected increase in prices of some food products, rentals/housing, transport and clothing, inflation has remained low.” Mr. Sabnavis, however, said CARE Ratings expects this number to move up in the coming months. “The impact of Pay Commission on overall spending as well as housing costs would enter these numbers gradually. Also possible single commodity shocks in the kharif basket can upset calculations,” he said. Mr. Sabnavis further said, “We do retain our CPI inflation target of 4-4.5% by March 2018. A rate cut of 25 bps can be expected in Q4 provided inflation remains below 4%.” (ENDS)