IIP expands at a slower rate than May; retail inflation at 7.97%

A full-blown revival in the country’s industrial activity might be a protracted process, even as a nascent recovery is on, the Index of Industrial Production (IIP) estimates for June suggested on Tuesday. Though the index reflected an expansion in industrial output, for a third straight month, the rate of growth fell to 3.4 per cent from the previous month’s revised estimate of five per cent.

Data on retail inflation, also released on Tuesday, seems to reaffirm the Reserve Bank of India’s (RBI’s) decision to maintain the status quo on the repo rate. The inflation rate, as measured by the consumer price index, rose to 7.96 per cent in July from 7.46 per cent the previous month.

A slower expansion in industrial output in June was primarily on account of a weak show by the manufacturing sector, which has a weight of 75 per cent on the index. Manufacturing growth slowed to 1.8 per cent from five per cent in May. Of the twenty-two industries that the index is comprised of, seven registered a contraction in output during the month, compared with six in May.

On a use-based classification, capital goods production, considered a proxy for investment demand, grew 23 per cent, against 4.3 per cent in May. But growth in this sector was erratic, owing largely to data-related issues. The biggest decline was seen in the consumer goods sector, with consumer durables output declining 23.4 per cent.

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