Strong macros, rising inflation may lead to rate hike

India’s macroeconomic factors portray an improvement in the economy. The manufacturing index surged substantially, while industrial production grew marginally for the month of April. The Inflation inched up to 4.9 per cent in the past month.

India’s industrial output rose by 4.9 per cent in April up from 4.4 per cent in month of March, strongly aided by capital goods production and overall surge in the manufacturing output. The manufacturing sector which contributes majorly to the industrial production index stood at 5.2 per cent vs 4.6 per cent in March. The other components electronics, auto, pharma, food, metals continued their improving performance.

However, electricity generation and infrastructure sector witnessed contraction in output in the month of April compared to March. The electricity generation rose by 2.1 per cent in April vs 5.9 per cent in March 2018. The infrastructure sector also improved slowly at 7.5 per cent in April vs 8.9 per cent in March 2018.

The inflation also inches up to 4.87 per cent in the month of May vs 4.58 per cent in the month of April 2018. This was mainly on the account of surge in food inflation which rose to 3.1 per cent from 2.8 per cent.

The rising inflation has triggered rate hike scenario in the economy. The RBI increased rates in the recent bi-monthly policy and rising inflation impede more hikes in the upcoming policy meet.