The industrial output of India fell continuously for the sixth month in a row this August. CPI(Consumer Price Inflation) overtook the 7 percent mark, hitting 7.34 percent in September. The food price went up reaching 10.68 percent compared to 9.05 percent in August. The index of industrial production(IIP) contracted 8 percent in August based on year-on-year. The official estimations suggest that marking an improvement marginally compared to July. In July, output shrank 10.8 percent as per revised estimations. Old quick estimations had pegged contraction of July at 10.4 percent.
More About The Industrial Output :
Industrial output began falling in March. The output of August does mark the contraction to be lowest since March. Output shrank to 18.7 percent in March. In April, contractions were 57.3 percent and 33.4 percent in May. Between April and August, the output of industries has now contracted 25 percent. Economists are saying many things. Food inflation and high transport cost due to the pandemic, increased inflation this much. It would make it tough for the RBI(Reserve Bank of India) to cut rates in its policy meeting in December. Hence, a decrease in industrial output.
Madan Sabnavis at CARE Ratings posted a note titled ‘Double Jeopardy for the Economy’. He said, “Inflation in CPI was higher, 7.4% than what we forecast, 6.4%… This will be between 6% to 7% in October too as vegetable prices are still high and will put pressure.” All sections of the economy like food, pharma, fast-moving consumer goods, contracted in August. Mr. Sabnavis termed it as a surprise.
“It is obvious that the initial boost has gone down after the pandemic unlocks”, he noted. The only sectors that experienced growth were metals, transport equipment, and tobacco.
The mining sector contracted 9.8% in August while the power sector shrank by 1.8%. Primary goods, capital goods, and consumer durables have negative growth of 15.4%, 10%-15.4%, and 10.3%. Retail inflation is over the tolerance band of 6% of RBI for the last 10 months. The total inflation rate for FY21’s second quarter is now the highest in all 24 quarters at 6.95%.
Head economist, India Ratings and Research. Sunil Kumar Sinha told many things. “It seems that the disruptions in supply- led inflation is now coming under control slowly. Core inflation(5.67%) averaged in September over the previous month,” He said.
Although, this is happening continuously from the last 5 months of core inflation of 5%. However, he was hopeful of some relief from inflation this month, October 2020. Thereby, we hope for an increase in industrial output.