Industrial output recovers minimally while retail inflation is at 16-month low

With industrial output posting a mild expansion in December and the retail price inflation rate declining to a 16-month low in January, the growth-inflation dynamics seem to be improving for the economy.

However, economists believe that growth is still weak and non-food articles like fuel continue to face inflationary pressures which may force the Reserve Bank of India (RBI) to remain accommodative.

The Index of Industrial Production (IIP) grew by 1 per cent in December on a year-on-year (YoY) basis compared with a 2 per cent decline in the last month, the data released by the National Statistical Office showed.

On the other hand, the consumer price index (CPI)-based inflation rate fell for the third consecutive month to 4.06 per cent in January as food inflation, pulled down by deflation in vegetables drastically declined. CPI inflation stood at 4.59 per cent in December and 7.59 per cent in January last year. Food inflation moved down to 1.89 per cent in January from 3.41 per cent in the previous month.

Industrial activity has posted growth in only three months in the current financial year so far. The IIP had turned positive in September after a gap of six months on the back of the festival season demand, indicating normalcy in economic activity after months of disruption caused by Covid-19.