IIP contracts 3.6% in February; retail inflation rises to 5.52% in March

India’s industrial production contracted by 3.6% in February, official data showed on Monday. Also, retail inflation rose to 5.52% in March, mainly on account of higher food prices, government data showed on Monday. The consumer price index (CPI) based retail inflation stood at 5.03% in February.

According to the Index of Industrial Production (IIP) data released by the National Statistical Office (NSO), manufacturing sector output declined by 3.7 % in February 2021.

Mining output slipped 5.5%, while power generation grew by 0.1% in February.

The IIP had grown by 5.2% in February 2020.

During April-February, IIP contracted by 11.3% compared to 1% growth in the corresponding period of 2019-20.

Meanwhile, the rate of price rise in the food basket accelerated to 4.94% in March, as against 3.87% in the preceding month, as per data released by the National Statistical Office (NSO).

Inflation in ‘fuel and light’ category was 4.50% during the month vis-a-vis 3.53% in February.

Earlier this month, the Reserve Bank of India had projected the retail inflation at 5% in the January-March quarter of 2020-21 and 5.2% in the first two quarters of the current fiscal.

After breaching the upper tolerance threshold of 6% for six consecutive months (June-November 2020), CPI inflation fell in December 2020 and eased further in January 2021 to 4.1% on the back of a sharp correction in vegetable prices and softening of cereal prices.

However, it rebounded to 5% in February, driven primarily by base effects.

The Reserve Bank, which mainly factors in the retail inflation while arriving at its monetary policy, has been asked to keep CPI inflation at 4% with a margin of 2% on either side.

The Central Bank retained the key lending rate (repo) in its last monetary policy citing inflationary concerns


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