Inflation Eases to 5.07% in Jan, IIP Declines to 7.1%; Slower Growth Ahead?

A positive news comes as the retail inflation decreases to 5.07% in January from 5.21% in December. Industrial Production for December grows at 7.1% in comparison to last year’s 2.4% for December.

Inflation Shows a Slight Slowdown

Inflation shows a slight slowdown for January giving a sign of relief for consumers. It is expected to be lower for February as the oil rate per barrel has fallen from last month. The present oil rate per barrel is Rs 3870 which has slowed down in comparison to last month. Retail inflation for January stood at 5.07% whereas food inflation grew at 4.58% which was at 4.85% a month earlier.

Inflation in Vegetable prices reduced to 26.97% in comparison to December 29.13%. Many other sectors too experienced a reduction in prices giving a relief to the customers. Retail inflation directly impacts the consumer therefore a rise in inflation can become a bitter experience for the people.

Inflation for the December grew to 17 months high and was recorded at 5.21%. The RBI on Wednesday kept the interest rates unchanged. RBI warned that in the upcoming months there would be rise in inflation. RBI projected a rate of 5.1% for March and indicated that for the first half of next fiscal year the inflation rate would be around 5.5-5.6%.

Industrial Growth Back on Track

After demonetization, industry saw a huge decline in growth as growth rate for December 2016 was recorded at 2.4%. YoY basis the growth has revived to 7.1%. In November 2017, IIP was recorded at 8.8%. Manufacturing growth was recorded at 8.4% for December in comparison to November’s 10.2%. Mining sector saw a 1.2% growth while electricity sector saw 4.4% growth.

Primary Goods growth was recorded at 3.7% while intermediate goods growth was recorded at 6.2%. Despite good recovery indications on monthly basis IIP from April-Nov saw a growth of 3.7% in comparison to 5.5% growth rate YoY basis. The biggest reason was demonetization that create a big impact on the industrial growth.

The upcoming months have elections in North Eastern states whereas Rajasthan, Madhya Pradesh and Karnataka are going for elections in the mid of 2018. A rise in inflation can be cause of worry for the center whereas RBI’s estimation of 7.2% growth for FY 2018 can be a sign of relief.