Factory output up after 6 months; retail inflation hits 6-year high

Industrial production, as measured by the index of industrial production (IIP), grew 0.2% in September against a 4.6% decline in the same period last year. However, manufacturing continued to contract. Revised data showed industrial production con...

Agencies
IIP returned to positive territory after six months.
In a mixed bag of economic indicators, India’s factory output expanded after a six-month gap in September as the economic recovery gathered pace. However, retail inflation climbed to an above six-year high in October, driven by higher food prices, ruling out further monetary easing.

Industrial production, as measured by the index of industrial production (IIP), grew 0.2% in September against a 4.6% decline in the same period last year. However, manufacturing continued to contract. Revised data showed industrial production contracted 19.5% in June and 7.3% in August. Earlier estimates had shown IIP shrinking 8% in August.

Retail inflation accelerated to 7.61% in October, exceeding the target rate, on dearer food inflation that was 11.07%. Consumer Price Inflation was 7.27% in September.


In the first six months of FY21, India’s factory output shrank 21.1% compared with 1.3% growth in the yearago period.

“The positive push will gain momentum in October too where some of the retail sales numbers have been positive,” said Madan Sabnavis, chief economist at CARE Ratings.

Mining and electricity grew 1.4% and 4.9%, respectively while manufacturing shrank 0.6%.
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“However, before we start rejoicing, it may be worthwhile to point out that it would not have been possible without the low base of last year,” said Devendra Pant, chief economist, India Ratings.

Among IIP subsectors, capital goods--an indicator of investment--witnessed the steepest decline of 3.3%. Ten out of 20 manufacturing subsectors reported growth in September. Consumer durables production, an indicator of urban demand, grew 2.8% while consumer nondurables witnessed the highest growth of all at 4.1%.

India’s economy gathered pace in October with Goods and Services Tax (GST) collections being 10% higher than the corresponding period of last year and railway freight in the last two months growing 15% over the year ago period.

However, economists cautioned that sustenance of the same post November will be the trend to watch because of festive spending and stimulus measures announced by the government on Thursday.
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HIGHER INFLATION

Retail inflation in October 2020 rose to 77 months high of 7.61%. The previous high was in May 2014. Food inflation was driven by inflation in vegetables at 22.51% in October from 20.73% last month. Inflation in pulses rose 18.34% from 14.67% while that in meat and fish rose 18.7% in October compared with a 17.6% rise in September. Clothing and footwear inflation was 3.17% compared with 3.04% in September.
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