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IIP, CPI

* IIP grew by 11.9% in Aug v/s 11.5% in Jul

* Mining and electricity sectors witnessed sharp improvement in Aug, while manufacturing growth moderated

* Manufacturing grew by 9.7% in Aug and 20 out of 23 industry group recorded positive growth

* Industrial activity witnessed a modest -0.2% decline on sequential basis

* IIP grew by 3.9% in Aug 2021 over Aug 2019 indicating normalisation of economic activity to pre-pandemic level

* CPI inflation eased to 5-month low at 4.35% in Sep

* CFPI eased to 0.7% in Sep v/s 3.1% in Aug due to deflation in vegetables and cereals

* Low food inflation offset impact of elevated fuel & core inflation

Industrial production grows at 11.9% in Aug

Indian industrial production (IIP) grew by grew by 11.9% in Aug (v/s 11.5% in Jul) despite softened of favourable base effects. Strong support to index came from mining and electricity sectors driven by the positive impact of a subdued rainfall while manufacturing growth moderated. Mining grew by 23.6% in Aug v/s 19.5% in Jul and electricity at 16.0% in Aug v/s 11.1% in Jul. Meanwhile, on MoM basis, IIP index modestly declined -0.2% in Sep. Manufacturing, which represents 77.6% in index, grew by 9.7% in Aug (10.5% in Jul) and 20 out of 23 industry group witnessed positive growth during the reported month. On use-based category, consumer durables grew by 8% in Aug (19.4% in Jul) and non-durables at 5.2% in Aug (-2.1% in Jul). Infrastructure grew by 11.1% in Aug (11.7% in Jul) and capital goods at 19.9% (30.5% in Jul). During Apr-Aug FY22, industrial production grew by 28.6% as compared to -25% contraction in the same period of previous fiscal.

Industrial activity showed pickup on yearly basis while index showed marginal contraction on monthly basis. Meanwhile IIP grew by 3.9% in Aug 2021 over Aug 2019 indicating normalisation of economic activity to pre-pandemic level. High frequency indicators for Apr-Sep suggest progress in the normalisation of economic activity. Manufacturing PMI at 53.7 in Sep remained in positive territory while GST collection at Rs1.17 lakh crore in Sep remained healthy. Though coal shortage led power deficit in the country can adversely impact industrial activity in coming months.

Inflation eases to 4.4% in Sep

CPI inflation eased to 5-month low at 4.4% in Sep (5.3% in Aug) on the back of sharp decline in food inflation and favourable base effect (inflation at 7.3% in Sep’2020). CFPI declined to 0.7% in the month of Sep (3.1% in Aug) due to deflation in vegetables for 10th consecutive month, cereals & and sharp reduction in fruit inflation. Vegetables prices declined by -22.5% in Aug (-11.7% in Jul), cereals at -0.6% (-1.4% in Jul) and fruits at 3.7% (6.7% in Jul). Inflation in pulses moderated modestly to 8.75% in Sep (8.81% in Aug) and protein items at 8.0% in Sep (9.2% in Aug). Fuel & power inflation was in double digit for the fifth straight month rising to 13.6% in Sep v/s 13.0% in Aug. Core inflation picked up to 5.8% due to high commodity prices.

Decline in inflation at 4.35% in Sep v/s 5.3% in the previous month was considerable given the prevailing high fuel prices in the country. Impact of double digit fuel & power inflation and high commodity prices was offset by low food inflation as some of food items like vegetables & cereal has been in the deep deflation trend. As per the RBI, easing food prices along with favorable base-effects could bring about a substantial softening in inflation in the near-term as food inflation index constitutes 47.3% of the CPI index. However higher pump prices, elevated commodity prices, high logistic cost and energy shortage will keep fuel and core inflation at elevated level in coming months. The RBI cut FY22 inflation forecast to 5.3% (earlier forecast of 5.7%) comprising of 5.1% in Q2FY22, 4.5% in Q3FY22.

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