Industry back in the black; inflation down

There was some good news on the economy front, with the index of industrial production or IIP rising 2 per cent (after contracting for three months in a row) in February and retail inflation dipping to a six-month low of 4.83 per cent in March as compared to 5.25 per cent in March 2015.

According to official data released on Tuesday, while electricity registered an impressive growth of 9.6 per cent and mining 5 per cent, manufacturing was sluggish, at just 0.7 per cent. Since factory output has a weight over 75 per cent in the IIP, the February growth remained low.

Industrial growth in the April-February period of the last fiscal, at 2.6 per cent, is not only low but looks even more depressing when one notices that the rate in the corresponding period in 2014-15 was also muted, at 2.8 per cent.

At present, retail inflation or the Consumer Price Index (CPI) is within the RBI’s comfort zone; the central banker had targeted CPI at 5 per cent by the end of the current fiscal. This also brightens the chances of further rate cut by the RBI.

While food inflation, the highest weight in CPI, has declined to 5.21 per cent in March, down from 5.3 per cent in February, everything is not okay. Pulses shot up sharply, rising at 34.15 per cent.