December factory output falls again, January inflation up 5.69 percent

Retail inflation based on Consumer Price Index (CPI) too rose for the sixth straight month to 5.69 per cent in January, on the back of costlier food prices including pluses.

The 1.3 percent decline in output at factories, utilities and mines was steeper than 0.1 percent fall forecast by economists surveyed. Manufacturing’s cumulative growth stood at 3.1 percent.

Fuel inflation eased to 5.32 per cent in January from 5.45 per cent in December, despite a series of excise duty hikes in petrol and diesel, led by a drop global crude oil prices.

The tempo of retail worth rise in January 2016 is the very best since 6.forty six % in September 2014.

Although the December output growth continued to be in the negative as compared to 3.6 percent growth in December 2014, it was somewhat better than the minus 3.42 percent dip registered in the month before. “The marginal 0.9 per cent volume growth in the manufacturing sector in Q3FY16 stood in sharp contrast to the growth of value addition revealed by the GDP data (12.6 per cent at constant prices and 10.9 per cent at current prices), which benefitted from lower input costs”, said Aditi Nayar, senior economist, ICRA.

The central bank could therefore face some challenges in containing retail inflation within its expected level of 5% by the end of the 2016-17 fiscal, said analysts. The 40-basis-point rise in food inflation in January to 6.85% on top of an nearly 40-basis-point increase in December, thanks to the stubbornly high inflation in pulses (43.3% for January), suggests that inflationary pressure from such items in the coming months will not evaporate.

Reacting to the latest figures, India Inc. on Friday urged the government for delivering a growth-oriented budget for the forthcoming fiscal.

Assocham President Sunil Kanoria told PTI, “Estimates of industrial production for December 2015 mirrored the subdued industrial activity in the country and call for urgent policy remedies”.

Importantly, the output of capital goods, a gauge for fixed corporate investment, contracted 19.7% in December, having already shrunk 24.5% in November.

In terms of industries, ten out of the twenty two industry groups in the manufacturing sector showed negative growth during December 2015 as compared to corresponding month of the previous year. The consumer goods segment accelerated by 2.8 percent.

Food and beverages prices climbed 6.66 percent and clothing and footwear prices increased 5.71 percent.