Retail inflation increases; IIP data contracts for 3 consecutive months

On Thursday, the National Statistical Office released the Index of Industrial Production (IIP) data, which shows that IIP registered contraction for three consecutive months since the first time in the new series of base year 2011-12.

Due to the poor performance by power, mining and manufacturing sectors, India's factory output growth, measured by the IIP, shrunk by 3.8 per cent in October 2019 as against the expansion of 8.4 per cent in October 2018.

In terms of industries, 18 out of 23 industry groups in the manufacturing sector have registered a negative growth in October 2019, as compared to last year (October 2018). Electricity and mining sector was the biggest laggards in bringing IIP data to this level.

Further, India’s retail inflation based on consumer price index (CPI) surged to a more than 3-year high to 5.54 per cent in November as compared to 4.62 per cent in October and 2.33 per cent in November 2018. The spike in inflation was mainly due to the costlier food products like vegetables, pulses and protein-rich items. It was also impacted due to RBI’s medium-term target of 4 per cent. Taking inflation into consideration, the RBI has taken pause post 135 bps cut in the last 5 meetings and has slashed FY20E GDP forecast to 5 per cent from 6.1 per cent, it had projected earlier.

Earlier, the GDP growth rate of India for the July-September quarter declined to 4.5 per cent from 5 per cent, as recorded in the April-June quarter.