Industrial production contracted for the second month running in March while consumer inflation accelerated to a three-month high in April, summing up for the next government the challenge of reviving growth while reining in prices.
The Index of Industrial Production (IIP) contacted 0.5% in March, compared with a 1.8% decline in February.
The Consumer Price Index (CPI) showed consumer inflation accelerated to 8.59% in April from 8.31% in March.
This shows the economy is still not showing signs of recovery from tepid below-5% growth in 2013-14 while the rise in inflation, amid fears of a deficient monsoon, rules out any chance of monetary easing to revive growth.
Industrial production fell 0.1% in 2013-14.
As many as 11, or half the manufacturing sub sectors, contracted in March, indicating the broadbased nature of the slump.
After four months of expansion, mining shrank 0.4% in March, amid a 0.8% contraction for the entire year. Electricity generation was up 5.4% in March.
The numbers show capital goods production contracted 12.5% in March, the fourth successive month of decline and deeper than the 3.7% fall in 2013-14. The data suggests investment activity has not picked up at all.
Inflation continues to force consumers to defer discretionary spending. Production of consumer durables, an indicator of such spending, fell 11.8% in March, capping a dismal year that saw a 12.2% overall decline.
Consumer non-durables is just about holding up with 7.2% growth in March.
The RBI isn’t likely to be in a position to do its bit to revive growth by cutting interest rates when it reviews its monetary policy on June 3 after inflation accelerated. Governor Raghuram Rajan has already indicated that he would not bow to pressure from the government on monetary management. "I determine the monetary policy. I say what it is. The government can fire me, but the government doesn’t set the monetary policy. So, in that sense, am I independent? Well, I am happy to talk to the government. I am happy to listen to the government but ultimately the interest rate that is set is set by me,” he said at St. Gallen Symposium in Switzerland on Friday.
The rise in consumer price inflation is largely because of the rise in food inflation, which could accelerate further if monsoon rain is below normal because of the El Nino effect. Consumer food inflation rose to 9.66% in April from 9.1% in March.
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