The macroeconomic numbers released on Friday did not provide any succor either to the government or India Inc, as industrial production showed a southward movement in June and retail inflation northward in July. While the index of industrial production (IIP) declined to 2.1 per cent in June, exactly half of 4.2 per cent in June 2015, retail inflation rose to 6.07 per cent in July, a 23-month high. For the April-June period, too, the IIP was down, 0.6 per cent, as compared to 3.3 per cent in the first quarter last fiscal.
The reason for the sluggish IIP is not difficult to find. Manufacturing, which has over three-fourths weight in the index and which is being promoted by the Make in India initiative, remains lethargic. In June, it grew just by 0.9 per cent, down from 5.2 per cent in June last year. Worse, in the first quarter of this fiscal factory output was in the negative territory, -0.7 per cent against 3.7 per cent in April-June 2015.
The worst performer in the IIP was capital goods, contracting 16.5 per cent, which is against -2 per cent in June 2015. In the first quarter, too, they showed -18 per cent, against 2 per cent in the corresponding period last fiscal.
Consumer durables grew at 5.6 per cent in June, as compared to 16.1 per cent a year ago. Consumer non-durable goods also declined to 1 per cent in June from 2.3 per cent a year ago. Overall, consumer goods production grew by 2.8 per cent in June against 7.2 per cent in June 2015.
Electricity, however, registered a healthy growth, 8.3 per cent in June, against 1.2 per cent in the same month a year ago. The mining sector, too, grew by 4.7 per cent in June as compared to -0.4 per cent in June 2015.
In terms of industry groups in the manufacturing sector, 18 out of 22 showed positive growth in June.
The consumer price index (CPI), reflecting retail inflation, went going up due to rising food prices in July, with the demand for sugar, oil & fats, and spices rising ahead of the festival season. While the CPI was 5.77 per cent in June, it crossed the 6-per cent mark in July. In July 2015, the CPI was at 3.69 per cent.
Food inflation increased to 8.35 per cent in July, against 7.79 per cent in the previous month.
With the government targeting inflation at 4 per cent (with a range of plus/minus 2 per cent for next five years) under the new monetary policy framework agreement with the Reserve Bank, policy makers face the dilemma over rate cuts. While weak industrial performance calls for cheaper money, rising prices are an inhibiting factor.