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Industrial Growth Stagnated by 4.5% in September; CPI Inflation Falls

Industrial Growth Stagnated by 4.5% in September; CPI Inflation Falls

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Industrial growth is slackening corollary to decelerating manufacturing and capital goods growth in September. According to the data the momentum is reduced by 4.5%. Contemporaneously, Consumer Price Index- used to measure inflation rate of household products- also saw a downward trend this quarter.

The Consumer Price Index, eased in October to 3.31% due to slowing price growth in the food, housing, and footwear segments.

Growth in the IIP slowed from 4.67% in August. Within the index, growth in the manufacturing sector slowed to 4.62% in September from 5.08% in August. Activity in the mining and quarrying sector witnessed an acceleration, growing at 0.21% in September compared with a contraction of 0.54% in the previous month.

“While statistically marginal, the overall production and manufacturing indices show a rise in absolute terms indicating that domestic demand likely remains resilient,” Anis Chakravarty, Lead Economist & Partner at Deloitte India said in a note. “Discounting for any base effect, manufacturing position has remained largely stable to positive as also reflected in improved consumption behaviour, and sales position.”

“Separately, gains in absolute terms were made in capital goods production, infrastructure, and consumer durables which are likely to positively impact growth numbers and may provide cushion against rising uncertainty and easing confidence,” Mr. Chakravarty added.

Consumer inflation eased in October from 3.7% in September. Within the CPI, inflation in the food and beverages segment contracted 0.14% in October compared with a growth of 1.01% in September.

“The October CPI print surprised positively as it was much lower than our and the street expectations,” B Prasanna, Group Executive and Head – Global Markets Group at ICICI Bank said in a note. “It continued to be aided by the food component which shrunk on a sequential basis underscored by components such as fruits, vegetables and pulses. The earlier fears of Minimum Support Price (MSP) hikes feeding through to CPI have been allayed.”

Inflation in the paan, tobacco and intoxicants segment quickened to 6.13% in October from 5.57% in September. The clothing and footwear category saw inflation easing to 3.55% from 4.64% over the same period. Inflation in the housing segment slowed to 6.55% in October from 7.07% in September. The fuel and light category of the CPI saw inflation slowing marginally to 8.55% from 8.63% over the same period.

“Benign inflation conditions and strong footing in the industrial development are expected to boost further the sentiments of investors and increased FDI and FII inflows in the coming months,” Rajeev Talwar, President, PHD Chamber of Commerce and Industry said. “Stability in retail inflation would help strengthening of macroeconomic environment and pave the way for soft monetary policy regime, going forward.”

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