September IIP jumps to 0.2% from minus 8% in August; Retail Inflation grows 7.61% in October

India's factory output, which is measured in terms of Index of Industrial Production (IIP), for the month of September 2020 jumped to 0.2 per cent from – (minus) 8 per cent in August 2020. According to the data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Thursday, November 12, 2920, the manufacturing sector logged a decline of 0.6 per cent in September 2020, while the output of mining rose 1.4 per cent and the power sector appreciated 4.9 per cent.

In September last year, IIP contracted by 4.6 per cent.

MoSPI in a statement said gradual relaxation of restrictions, there has been a relative improvement in the economic activities by varying degrees as well as in data reporting. Data said, the electricity generation rose by 4.9 per cent to 166.4 in October, and the mining sector output grew by 1.4 per cent to 87.6. However, the manufacturing sector contracted 0.6 per cent to 125.3.

In the period of April 2020 to September 2020, the IIP showed a contraction of 21.1 per cent when compared with the corresponding period of last financial year. The IIP had grown 1.3 per cent during the same period last year.

On the other hand, Retail inflation (CPI), which is measured by the Consumer Price Index (CPI), inched up to 7.61 per cent in October 2020. It is the highest level in nine months. According to the government data released today, inflation increased mainly due to the rise in food prices. The inflation in the food basket surged to 11.07 per cent in the month of October, up from 10.68 per cent in September this year.

The CPI for the month of September this year revised to 7.27 per cent from 7.34 per cent.

The retail inflation has grown beyond the Reserve Bank of India's (RBI) upper margin of 6 per cent. The government has mandated the central bank to keep retail inflation within the range of 4 per cent with a margin of 2 per cent on either side. RBI factors in the retail inflation level while deciding its bi-monthly monetary policy. In October, the central bank kept its key interest rates unchanged in its bi-monthly monetary policy meeting in October 2020 and decided to maintain its accommodative monetary policy stance to support growth amid the pandemic.

The growth in inflation was primarily due to a rise in vegetable prices that surged 22.51 per cent on-year rise in October. Apart from vegetables, the eggs segment saw a rise of 21.81 per cent, while that of meat and fish rose 18.70 per cent and pulses and products prices gained 18.34 per cent. The oils and fats segment also witnessed a rise of 15.17 per cent.