Inflation hits double digits, IIP growth slides to single digit
Snapping an eight-month trend of double-digit rise, industrial growth slid to 7.1 per cent in June from 8.3 per cent a month ago. Growth in manufacturing, which constitutes around 80 per cent of the IIP to measure factory output, fell to 7.3 per cent from 8 a year ago, according to government data released today.
Electricity generation expanded by 3.5 per cent from 8 per cent in June, 2009. Mining expanded the fastest at 9.5 per cent, but was still lower than 14.2 per cent registered a year ago. Consumer durables was the only industry to show a somewhat good growth. It expanded by 27.4 per cent against 16.2 a year ago. Finance minister Pranab Mukherjee today said industrial growth of 7.1 per cent in June, lowest in the last 13 months, was below his expectations. “I expected it to be a little better,” Mukherjee said.
Industrial growth figures for May was revised downwards to 11.35 per cent from 11.50 per cent estimated earlier. The decline in industrial expansion will further increase RBI’s dilemma on rate hikes to check inflation, experts said.
Meanwhile food inflation returning to double digits is not in itself a cause for alarm, although overall inflation remains a concern in the medium term, government’s chief economic adviser Kaushik Basu said today. “Inflation situation in the medium-term remains something of a concern but today it is not something which shows that the situation has got worse,” Basu said.
After two weeks of single digit output, food inflation for the week ended July 31 shot up to 11.40 per cent from 9.53 per cent the week earlier on the back of a spike in prices of cereals, milk and fruits. “I just want to clarify this was entirely predictable. It has nothing to do with the Food Price Index (FPI) which has actually fallen slightly.” the economic adviser said.
