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Mixed show: Industrial growth slows to 3.4%, retail inflation nears 8%

The country’s industrial output growth slowed to 3.4% in June, while retail inflation inched to nearly 8% in July, posing fresh challenges for policymakers, who are battling to revive growth and tame inflation.

Data released by the Central Statistics Office (CSO) on Tuesday showed industrial output in June rose 3.4% year-on-year from a decline of 1.8% in June 2013 and slower than the upwardly revised 5% expansion in May 2014.

Separate data showed retail inflation rose 7.96% in July, compared to previous month’s 7.46%, largely driven by pressure on fruits, vegetables and beverages prices. Retail inflation is close to the Reserve Bank of India’s target of keeping it at 8% by January 2015.

“Inflation uncertainty exists, given that the monsoon outcome, though improving is still below-normal. Under these conditions, inflationary expectations would tend to get embedded till the harvest season sets in,” said Madan Sabnavis, chief economist at CARE ratings.

“Depending on the spread of rainfall, a clearer picture would emerge in September-October on the exact impact on output. Therefore, RBI is likely to maintain a cautious stance in the next policy too,” Sabnavis said in a note.

Economists said although the factory data for June was disappointing but the overall picture showed some recovery, though not a significant turnaround. The Narendra Modi government has vowed to steer the economy out of two consecutive years of sub 5% growth.

“Industrial growth too disappointed as it slowed to 3.4% in June after growing at 5% in May. However, its overall performance in first quarter of FY-15 is signalling a gradual recovery,” ratings agency Crisil said in a note. “Given the first quarter IIP growth and assuming that the construction sector grew at the same rate as in FY-14, industrial GDP is likely to have grown around 3.3% in first quarter of FY15,” the agency said.

Electricity and mining posted handsome growth but manufacturing remained sluggish and continued to be a concern. The manufacturing sector rose 1.8% in June compared to a contraction of 1.7% in the same month last year.

The electricity sector grew 15.7% in June compared to zero growth in June 2013, while the mining sector, which borne the brunt of policy delays, grew 4.3% compared to a contraction of 4.6% in June 2013.

The consumer goods sector continued to remain sluggish and declined 10% compared to a contraction of 1.5% in June 2013, while consumer durables fell 23.4% in June compared to a decline of 10.1% in June 2013.

The industrial sector has remained sluggish for a significant period due to a string of factors such as policy and regulatory delays, high input costs, slowing demand, investment and high interest rates. But the approval to a number of stalled projects is expected to steer a recovery in the months ahead and should augur well for the overall growth.

Vocabulary:

1. The synonym for the ‘high prices’ is: 

(a) inflation 

(b) depression 

(c) dearness 

(d) boom 

2. ‘Something fixed firmly in something’ is: 

(a) embedded 

(b) included 

(c) inclusive 

(d) studied  

3. The opposite of the word ‘fast’ in the passage is: 

(a) sluggish 

(b) slow  

(c) decreased 

(d) static 

4. The noun form of the word ‘disappoint’ is: 

(a) disappointed 

(b) disappointing  

(c) disappointment 

(d) none of these 

1 Answer

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Best answer

1. (a) inflation 

2. (a) embedded 

3. (a) sluggish 

4. (c) disappointment

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