Retail inflation falls below 6% mark for first time in 2022

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| Photo Credit: Sushil Kumar Verma

India’s retail inflation fell below the 6% mark for the first time this calendar year in November, cooling to 5.88% from 6.77% in October, with food price inflation faced by consumers easing to 4.67% from over 7% in October. Rural retail inflation, however, stayed high at 6.09%.

India’s industrial output contracted by a sharp 4% in October, the second time in three months that production levels have contracted year-on-year, led by a significant 5.6% drop in manufacturing output and minimal growth recorded in electricity generation. Industrial output had grown nearly 3.5% in September, as per revised numbers.

The Index of Industrial Production (IIP) stood at 129.6 in October, its lowest level since September 2021. with manufacturing output slipping to its lowest mark since June 2021. Mining output grew 2.5%, while electricity generation rose just 1.2%.

As many as 17 of 32 manufacturing sectors tracked in the IIP recorded negative growth, led by apparel (-37%), electrical equipment (-33.2%), leather products (-24.3%), pharmaceuticals (-21.4%) and textiles (-18.6%).

Classified on the basis of their use, production declined in four of six sub-sectors, led by consumer durables as well as consumer non-durables that shrank a sharp 15.3% and 13.4% respectively from October 2021 levels. This is the fourth successive month that consumer non-durables output has shrunk and the third month in a row that durables production dropped.

Intermediate goods and capital goods production also contracted year-on-year, by 2.8% and 2.3%, respectively, while primary goods grew 2%. Infrastructure/construction goods output rose a mere 1% in October, but was 0.7% below September 2022 levels.

Terming the October IIP print a surprise, Bank of Baroda chief economist Madan Sabnavis said the negative growth in capital goods over a 1.6% contraction recorded last October is disappointing and suggests private sector investment has not picked up.

Moreover, the continued decline in consumer durables and non-durables is a let-down as one would have expected them to be buoyant during the festival month of October, he noted. “Quite clearly, high nominal consumption has been due to higher inflation… Future prospects do not look so positive as we move to the end of the festival months,” Mr. Sabnavis reckoned.

“The IIP posted a deeper-than-expected contraction, mirroring the anaemic performance of exports, but chiefly reflects holidays during the festive period,” said Aditi Nayar, chief economist at ICRA, adding that growth of most available high-frequency indicators improved in November relative to October.