base fades, we expect the CPI inflation to bounce back to an average of 5 per cent in the remainder of H1 FY22, ruling out the possibility of further rate cuts to support economic activity and sentiment … However, with the economic outlook remaining uncertain in the light of the continuing pandemic, we expect the monetary policy stance to remain accommodative for much of 2021,” said Aditi Nayar, chief economist, ICRA Ratings.
She added the continuing elevated fresh Covid-19 infections posed substantive risks to the outlook for consumer sentiment and economic activity in several Indian states.
“There is a distinct downside bias to our forecast of a 20-25 per cent GDP expansion in Q1 FY22,” added Nayar.
The cumulative contraction in the index of industrial production
during April-March (2020-21) was 8.6 per cent, compared to de-growth of 0.8 per cent during the same period a year earlier, indicating that growth was tepid even before lockdown
started last year. Comparing the IIP for March 2021 with March 2019 reveals a marginal contraction of 0.5 per cent.
“There are signs of de-industrialisation with output falling in two successive years,” said Madan Sabnavis, chief economist at CARE Ratings.
sector output, which accounts for more than 75 per cent of the index, saw growth of 25.8 per cent in March from 2.1 per cent growth in February and a contraction of 22.8 per cent a year ago. Similarly, mining, which accounts for over 14 per cent of the index, grew 6.1 per cent as compared to a 4.3 per cent contraction in February and a 1.3 per cent decline last year.
Growth in electricity generation stood at 22.5 per cent in March, as compared to a contraction of 8.2 per cent in the same month last year.
Consumer durables output witnessed the sharpest expansion of 54.9 per cent in March, from (-) 36.8 per cent last year, mainly due to low base. Capital goods output, which reflects private sector investment, grew 41.9 per cent in comparison to a (-) 38.8 per cent fall last year.
Food inflation eased to 2.02 per cent compared to 4.87 per cent in March. Rural areas witnessed higher inflation at 9.57 per cent, while cities saw 9.10 per cent inflation in food.
The Reserve Bank of India has projected an inflation rate of 5.2 per cent for the first half of the current fiscal year.
The prices of vegetables declined by 14.18 per cent in April against a 4.83 per cent fall in March. Prices of cereals fell 2.87 per cent from a 0.69 per cent decline in March.
Fruit saw its inflation rate rising to 9.81 per cent in April from 7.86 per cent in the previous month.
Meat and fish saw the rate rising to 16.68 per cent in April from 15.09 per cent in March. On the other hand, eggs saw the rate declining marginally to 10.55 per cent 10.60 per cent in March.
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