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Industrial output slows, but inflation eases
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SME Times News Bureau | 13 May, 2015
Indications of a strong industrial recovery were belied with the growth
in India's factory output slowing to 2.1 percent in March, even as the
retail inflation eased nearly 40 basis points to 4.87 percent in April,
as per official data released on Tuesday.
Analysts said this
should make India Inc. exert more pressure on the Reserve Bank of India
(RBI) to ease its interest rates in its monetary policy update in June,
or even earlier, since the industry needs a push for sustained growth,
even as easing of inflation is a comforting factor.
The factory
output had grown at a higher pace of 5 percent in February, while for
the fiscal year 2014-15 as a whole the expansion at 2.8 percent was
better than the contraction of 0.1 percent in the year before. In the
case of retail inflation, it eased further from 5.25 percent in March.
Official
data on the Index of Industrial Production (IIP) released on Tuesday
suggested that the main reason for the slowdown was a sharp decline in
the growth of manufacturing, which has the maximum weight, from 5.2
percent in February to 2.2 percent in March.
Of the other two
major sub-indices, the index for mining expanded by 0.9 percent against
1.9 percent in February, while that for electricity was up 2 percent for
March, against 5.9 percent in the month before.
For the year as a
whole, that is during 2014-15, the indices for manufacturing, mining
and electricity were up by 2.3 percent, 1.4 percent and 8.4 percent,
against, (-)0.8 percent, (-)0.6 percent and 6.1 percent, respectively
for the year before.
In the case of Consumer Price Index (CPI)
numbers, also released on Tuesday, the food inflation continued to
remain higher than the rise in general index -- at 5.11 percent in
April. Yet, it showed an improvement over 6.14 percent in March and 9.21
percent in April 2014.
Even though the data on factory output
and inflation were released after the close of markets on Tuesday,
analysts said the anticipated fall in factory output had been factored
in. It was seen as one of the main reasons for a 630-point, or near
2.5-percent, fall in a key equity index.
The India Inc welcomed
the data, however it also called for immediate redressal of issues like
high interest rates and infrastructure bottlenecks.
“While it is
reassuring to see the positive growth in manufacturing for 2014-15, but
the growth remains tepid," said Jyotsna Suri, president, Industry body
Federation of Indian Chambers of Commerce and Industry (Ficci).
"Critical
constraints for the sector like high interest rates, infrastructure
bottlenecks, low domestic and export demand are an area of concerns for
the sector and may continue to impact the growth of the sector in coming
months."
According to Suri, the overall business confidence has
improved in the last few months and that the industry is hopeful that
steps taken by the government would yield benefits.
Another
leading industry body PHD Chamber of Commerce and Industry said that the
factory output is not consistent with the various reforms undertaken by
the government.
"First and foremost must be the revival of
demand scenario especially the rural demand in the country which is
impacted by multiple factors of which sub-sided growth of income levels,
slower growth of employment, increasing costs of credit," said Alok
B.Shriram, president, PHD Chamber.
"So, at this juncture, economy needs to be refueled with overhauling of structural constraints from the grassroot level."
However,
Shriram welcomed the decline in inflation citing it as 'inspiring' as
it will create more room for softening of monetary policy stance and
help demand to reinvigorate.
The Associated Chambers of Commerce
and Industry of India (Assocham) said that the government needs to keep
on pushing more ground level reforms and improve implementation so as to
realize the true potential of the manufacturing sector and also
generate employment opportunities. "The chamber feels that it
is extremely important for the growth momentum to be maintained.
Concentrated and sustained efforts need to be targeted at reviving the
electricity, basic and the consumer durables sector," said D.S. Rawat,
secretary general Assocham.
"Government needs to address the
peculiar challenges faced by these segments which would then further
boost the industrial growth of the economy.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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