IIP rises to 5-month high of 3.8%; inflation slightly up at 5%

New Delhi: Reviving hopes of manufacturing recovery, industrial production grew at five-month high of 3.8 per cent in November last year, but retail inflation inched up to 5 per cent in December.

The focus will now be on RBI's stance on interest rate as a decline in inflation could have bolstered hopes for a rate cut.

Manufacturing output, which constitutes over 75 per cent of Index of Industrial Production (IIP), grew by 3 per cent in November, compared to a dip of 2.6 per cent in the same month in 2013, as per to the data released by the government.  During April-November, manufacturing output saw a growth of 1.1 per cent compared to a contraction 0.4 per cent in the year-ago period.

The factory output, as measured by IIP, had declined by 1.3 per cent in November 2013.

For the April-November period of this fiscal, IIP is up 2.2 per cent, as against 0.1 per cent in the same period of the last fiscal.

As regards retail inflation, the Consumer Price Index (CPI) inched up marginally to 5 per cent in December from the 4.38 per cent in November.

The industry, however, continued its demand for a rate cut by the Reserve Bank of India in its February 3 policy review to strengthen the economic recovery ignoring the slight rise in retail inflation.

Hopes of rate cut were building up after retail inflation touched 4.38 per cent, the lowest level since government started computing the new series of data in January 2012.  Commenting on the data, CII Director General, Chandrajit Banerjee said, “a marginal rise in retail inflation in December...should not prevent the RBI from cutting benchmark interest rates in its forthcoming monetary policy announcement.”

Rate cut he added, is important as “investments have not shown a significant pick up and consumer durables continue to show a muted performance.”

Overall, 16 of the 22 industry groups in manufacturing showed positive growth in November.

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