India's Index of Industrial Production (IIP) for the month of December has contracted 1.3 versus -3.2 percent in November, while the Consumer Price Index (CPI) for the month of January has come in flat at 5.69 percent compared with 5.6 percent reported for the month of December.
According to a CNBC-TV18 poll, IIP was expected at around -1.26 percent, while consensus was expecting the consumer price index (CPI) to come in at around 5.52 percent.
Furthermore, food inflation came in at 6.85 percent versus 6.40 percent last month, with vegetable price inflation coming in at 6.39 percent versus 4.63 percent MoM, cereals and products rising marginally to 2.19 percent versus 2.12 percent a month ago. The only good news has come on the pulses and products front, which came in at 43.32 percent, against 45.92 percent MoM.
Shubhada Rao, Chief Economist of Yes Bank, says if things go well and 7th Pay Commission is implemented, inflation would be at 5.4 percent next year, caveats being agricultural and commodity output. She believes the government will have to make a move to boost the economy.
In addition, data suggests that both rural and urban inflation grew to 6.48 percent and 4.81 percent MoM. While clothing and footwear inflation was reported flattish at 5.71 percent, urban consumer housing inflation rose to 5.2 percent against 5.06 percent MoM.
Other than that, the combined fuel and light inflation shrunk to 5.32 percent.
As far as industrial production is concerned, ten out of twenty two industry groups in the manufacturing sector have shown negative growth during the month of December as compared to the corresponding month of the previous year. Analysing sectorally, mining, manufacturing and electricity grew 2.9 percent, -2.4 percent and 3.2 percent in December as compared to the same month in 2014.
Basic goods output was at 0.5 percent versus -0.7 percent MoM and capital goods output grew at -19.7 percent versus -24.4 percent MoM. Soumya Kanti Ghosh, Chief Economic Advisor, SBI, says it is the Chinese issues which are hampering market in the capital goods segment and if the IIP weakness continues, Reserve Bank of India (RBI) may have to change policy rates in the month of April.
Furthermore, consumer goods output, consumer durables output and consumer non-durables output stood at 2.8 percent, 16.5 percent and -3.2 percent, respectively.
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