Rate Cut Hopes Rise on Inflation and IIP Data RBI

Rate Cut Hopes Rise on Inflation and IIP Data RBI

Consumer price inflation eased to a four-month low of 4.87 % in April, whereas the annual industrial output growth slowed to 2.1 % in March, government data showed on Tuesday.

Retail inflation in April inched down to a four-month low of 4.87 % as prices of food items, vegetables and fruits turned cheaper. Alternatively, factory output, as measured by the Index of Industrial Production (IIP), contracted by 0.5 per cent in March 2014, government data showed.

The twin macro-economic indicators strengthen the government and industry's call to Reserve Bank of India Governor Raghuram Rajan to cut interest rates.

RBI is scheduled to review its monetary policy on June 2.

Commenting on the data, CII Director General Chandrajit Banerjee said, "CII hopes this (easing inflation) would provide the requisite space to RBI to continue with its rate easing cycle in its upcoming monetary policy announcement to provide a fillip to growth and also encourage banks to reduce rates."

Besides, Ficci President Jyotsna Suri said," the manufacturing growth remains tepid. Critical constraints for the sector like high interest rates, infrastructure bottlenecks, low domestic and export demand are an area of concerns and may continue to impact the growth of the sector in coming months."

According to the data released by the Central Statistics Office, industrial production grew at 2.8 percent in 2014-15 as against a contraction of 0.1 percent in 2013-14.

Meanwhile, IIP for February has been revised downwards by CSO to 4.86 per cent from the provisional estimate of 5 per cent released last month.

The IIP had grown at 2.77 percent in January, 3.56 percent in December and 5.2 percent in November, correspondingly.

According to IIP data, manufacturing output, which constitutes over 75 per cent of the index, grew by 2.2 per cent in March as against a contraction of 1.3 per cent in the same month a year ago.

The production of capital goods, a barometer of demand, grew by 7.6 per cent in March as against a contraction of 11.5 per cent in the same month of last year.

Mining sector grew by 0.9 % in March 2015 as against 0.5 per cent expansion in the same month last year.

On the whole, 13 out of 22 industry groups in the manufacturing sector showed positive growth during March.

For whole 2014-15, the manufacturing sector expanded by 2.3 per cent as against a contraction of 0.8 per cent in 2013-14.

Capital goods output grew by 6.2 per cent last fiscal as against a dip of 3.6 per cent in 2013-14.