The current Financial quarter has brought good news for the Indian Economy. The Industrial production growth rate for the month of January was recorded at 7.5 percent. On the other hand inflation for the month of February dropped to 4.4 percent. In order to maintain this momentum, industry experts are now asking for a reduction in the policy rates in the monetary policy review meeting of the RBI, due next month. The RBI’s next monetary policy review meeting is scheduled for April 5, 2018. RBI, India’s central banking institution, had previously made no changes in the policy rate in anticipation of increasing inflation. Industry body CII in a statement said that the RBI should now start reduction cycles for policy rates in order to accelerate the rate of economic revival.
The data from the Central Statistical Organization (CSO), indicates an economic resurgence. Consumer Price Index was recorded at a four-month low of 4.44 percent. Retail inflation is governed by the CPI Parameter. A Major factor facilitating the decrease in inflation was the decrease in food /eatables costs as well as fuel price. However, the inflation rate for the same month last year was 3.65 percent. Data released by CSO also affirmed a decline of 1.5% in inflation in the consumer food segment. The inflation in consumer food segment stood at 3.26 percent in February. Some other key points of the data from the Central Statistical Organization (CSO) are:
- The inflation rate for vegetables reached 17.57 percent in January this year compared to 26.97 percent in for the same month in 2017.
- The inflation rate for fruits was recorded at 4.80 percent against 6.24 percent in January
- Retail inflation for January was pegged at 5.07 percent.
- The growth rate of IIP for April-January was at 4.1.
Industrial Production
Industrial Production managed a growth rate of 7.5% in January 2018. This is almost double than 3.5 percent growth rate recorded during the same month last year. A major reason for this change has been the re-surge of the manufacturing sector post-Demonetisation and GST. The increase in demand for consumer and capital goods has accelerated industrial growth. As per the CS data, the growth in Index of Industrial Production (IIP) was 7.1 percent in December 2017. The IIP for January 2018 was 8.7 % compared to the 2.5 percent in January 2017. Manufacturing Sector accounts for about 77.63 percent of the IIP growth. These are clear signs that the Indian Economy is now on the path of revival and is traversing a growth trajectory.
Investments in Capital Goods are paying dividends. Production of capital goods grew by 14.6 % in January 2018. Last year this figure was at 0.6 percent for the same month. The growth rate in non-sustainable consumer goods segment in the month of January was 10.5 percent. This was an increase of nearly one percent from January 2017. Compared to as low as 2 percent last year, consumer durables recorded 8 percent growth in January 2018.
The mining sector, however, remains unfazed by the surge. It showed moderate growth of 0.1 percent growth for January 2018. This is a significant fall when compared to the 8.6 percent growth for January 2017. The growth rate of primary articles based on the use commodities was 5.8 percent annually. Industries manufacturing medium goods recorded a 4.9 percent growth. In addition to the above sectors, the infrastructure sector witnessed the growth rate of 6.8 percent. 16 out of the 23 industrial groups in the manufacturing sector registered positive growth for the month of January.
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However, the IIP growth rate for the April-January period of the current financial year has seen a fall of nearly one percent when compared to the 5 percent growth during the same time period last year.
