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Finance Minister Arun Jaitley can draw some respite from the latest macro-economic indicators as he sets out to present Union Budget 2016-17 on February 29.
Though the numbers may not please the economists much, a close look at the data on retail inflation and factory output released on Friday showed a marginal improvement in the economy.
Consumer price index (CPI) based inflation rose marginally, to 5.69 per cent in January from 5.61 per cent in December as food items became more expensive. It was 5.19 per cent a year ago.
The Index of Industrial Production (IIP) contracted by 1.3 per cent in December 2015 as against a contraction of 3.4 per cent in November 2015, with a better performance by the mining and electricity sectors.
Both the numbers, however, highlighted the need for continued policy measures to lift manufacturing performance and tame food prices. With items such as meat and fish, eggs and vegetables becoming costlier, the consumer food price index rose to 6.85 per cent in January as against 6.4 per cent in December.
On a cumulative basis, the IIP grew at a robust 3.1 per cent in the first nine months of the fiscal year compared with 2.6 per cent growth in the corresponding period last fiscal. Electricity grew 3.2 per cent in December while mining grew 2.9 per cent. However, manufacturing contracted by 2.4 per cent, raising questions over the perceived revival in factory output. Analysts also warned that the latest data indicate an uneven and fragile industrial recovery.
“As both high-frequency data show deterioration, the management of the economy by the government as well as the RBI is going to be more difficult, particularly when the Budget is due by the end of this month,” said Sunil Kumar Sinha, Principal Economist, India Ratings.
In the use-based classification, basic goods grew 0.5 per cent in December while capital goods showed some improvement but contracted 19.7 per cent (24.4 per cent contraction in November 2015). Consumer goods grew 2.8 per cent in December while consumer durables rose jumped 16.5 per cent.
“The persistent and widespread contraction in industrial growth in November-December 2015 is a concern. Based on volumes, industrial growth eased to a five-quarter low of 1.5 per cent in the third quarter from 4.8 per cent in the second quarter,” said Aditi Nayar, Senior Economist, ICRA.
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