Industrial growth recovers, CPI hits 22-mth high at 5.77% in June

Showing feeble signs of recovery, industrial production grew by 1.2 per cent in May, but retail inflation touched a 22-month high of 5.77 per cent in June, squeezing headroom for a rate cut by Reserve Bank. Industrial production rebounded from a contraction of 1.35 per cent in the previous month, but growth was subdued at 1.2 per cent in May and mainly due to some uptick in consumer durables output and manufacturing activity.
Factory output, measured in terms of the Index of Industrial Production (IIP), had expanded by 2.5 per cent in May last year. However, on cumulative basis, factory output in April-May contracted 0.1 per cent compared with 2.8 per cent growth in the year-ago period, the data released by the Central Statistics Office (CSO) .
The retail inflation measured on the Consumer Price Index (CPI) was marginally lower at 5.76 per cent in May, while it was 5.40 per cent in June last year.
In August 2014, consumer inflation was at 7.8 per cent.
Overall food inflation moved up to 7.79 per cent in June from 7.47 per cent in the previous month.
Inflation in vegetables was up at 14.74 per cent as against 10.77 per cent in May and in cereals and related products it was 3.07 per cent compared to 2.59 per cent in the previous month.
With inflation remaining at an elevated level and above the 5 per cent-mark, RBI’s next monetary policy review on August 9, would be keenly watched as inflation targetting has been the main objective of the apex bank.
“The growth in manufacturing remains subdued and is a cause for concern. Weak consumer and investment demand points to the fact that recovery is going to be slow in manufacturing and the need for addressing more deep rooted structural issues,” said FICCI Secretary General A Didar Singh.
Terming the latest IIP numbers fragile, industry chamber Assocham urged the policymakers to address structural problem in the economy where demand for capital is lacking because of excess capacity, slow growth in new orders, high leverage and supply of capital is lacking because of rising NPAs, mounting losses with banks, limited availability of capital for lending.

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