India’s Industrial Output Growth Eases More Than Forecast

India’s industrial output in September rose at 3.6 per cent compared with 6.3 per cent in August despite an increase in growth of index of eight core industries.

Meanwhile, the factory output was revised slightly downwards to 6.2 per cent for August, from the provisional estimate of 6.4 per cent earlier.

As per the sectoral classification, while the manufacturing sector grew 2.6 per cent during the month compared to 2.7 per cent during the same period last year and a robust 6.9 per cent growth clocked in last month, the mining sector witnessed a growth of 3 per cent in production in September as against 0.1 per cent in the corresponding period last year and 3.8 per cent in August 2015. Retail inflation for October, also released on Thursday, accelerated to 5 per cent from 4.4 per cent in September, marking the fourth consecutive month of consumer price inflation quickening. However, since Reserve Bank Of India governor Raghuram Rajan has already “frontloaded” monetary easing in the form of a sharper-than-expected cut in the repo rate by 50 basis points this month, it’s unlikely to go for another round of easing action anytime soon despite the slowing industrial output growth, said analysts.

The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of September 2015 stand at 118.8, 186.7 and 195.7 respectively, with the corresponding growth rates of 3.0%, 2.6% and 11.4% as compared to September 2014 (Statement I).

The manufacturing sector, which constitutes over 75 per cent of the index, grew by 2.6 per cent in September, 2015, against 2.7 per cent expansion in the same month a year ago.

IIP stood at 4% in April-September 2015 against 2.9% in the year-ago period.

The growth rates in September 2015 over September 2014 were 4.0% in Basic goods, 10.5% in Capital goods and 2.1% in Intermediate goods.

Commenting on retail inflation, CII Director General Chandrajit Banerjee said, “Despite the moderation in September industrial growth compared to the previous month, we expect a pick up in the third quarter”.

Notably, by usage, the capital goods sector slowed down considerably, coming in at 10.5 per cent in September compared to 21.4 per cent in August. Retail food inflation surged to 5.25 per cent from 3.88 per cent in September.

The price rise in spices category was higher at 9.82 per cent and for non-alcoholic beverages at 4.31 per cent. The central bank’s retail inflation target is 5.8 per cent by January 2016.