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Call for ‘proactive’ steps in Budget as IIP dips, inflation rises

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New Delhi: Reflecting sluggishness in the economy, the industrial production growth has slipped to 1.7 percent in December month-on-month, while inflation rose to 5.11 percent in January, raising demands for proactive steps in the forthcoming Budget to boost economic expansion.

The growth in factory output, as measured by the Index of Industrial Production (IIP), in the month under review was, however, higher as compared to December, 2013 when it expanded by 0.1 percent.

The November IIP of 3.8 percent has been revised upwards to 3.9 percent.

The Consumer Price Index (CPI), computed with a new base year of 2012, rose to 5.11 percent in January month-on-month mainly due to dearer food and beverages items including fruits and vegetables.

In December, retail inflation was at 4.28 percent (recalculated with new base year). The same 5 percent with 2010 as base year.

Commenting on data, industry chamber FICCI said: “We are hopeful that the forthcoming budget would factor in the slow growth in manufacturing for the last many months and the need to provide major incentives to revive investments in the sector.”

It suggested that RBI should lower the interest rate as it is needed to boost consumer and investment sentiments.

Last month, Reserve Bank had lowered the rate of interest by 0.25 percent to 7.75 percent after a gap of 20 months.

After releasing the new series of CPI with 2012 as base year and rejigging weight of different items and groups, Chief Statistician T C A Anant said: “Inflation in 2014-15 will be lower than the 2013-14 level.”

He further said that besides changes in weight of items and groups “we have shifted to geometric mean for computing inflation from arithmetic mean used in previous series”.

Food and beverages inflation in January was 6.13 percent due to costlier fruits, vegetable and cereals.

The rate of price rise in egg contracted by 0.24 percent in January, while the same shot up to 9.38 percent in milk and related products.

The government also released Consumer Food Price Index (CFPI) or which stood at 6.06 percent on annual basis at national level.

The CFPI in urban areas was 6.96 percent while it was 5.69 percent in rural areas in January.

Similarly, the retail inflation or CPI in urban and rural areas was 4.96 percent and 5.25 percent respectively.

The price rise in ‘pan, tobacco and intoxicants’ was 8.21 percent while it was a low of 3.74 in the fuel and light segment.

Inflation dipped in case of sugar and confectionery as well as in transport and communication segments.

The Central Statistics Office has been releasing CPI for Rural, Urban and Combined, at state/UTs and all India level, since January 2011.

With this (base) revision, the gap between Price Reference Year (Base Year) and the Weight Reference Year has been minimised.

Apart from base revision, a number of methodological improvements have been introduced in the revised series.

Prices of Antyodaya Anna Yojanna (AAY) have also been included in addition to Above Poverty Line (APL) & Below Poverty Line (BPL) prices being taken in the existing series.

The weight of food and beverages is 45.86 in the new 2012 series compared to 47.58 in 2010 series for national index.

The weight of fuel and light segment is 6.84 in the new series as against 9.49 in the 2010 series.

The weight of clothing and footwear segment has been increased to 6.53 from 4.73 while that of housing is also hiked to 10.07 from 9.77.

On IIP front, manufacturing output, which constitutes over 75 percent to the index, grew by 2.1 percent in December compared to a dip of 1.1 percent in the same month a year ago.

For April-December period, the sector saw an output growth of 1.2 percent, compared to a contraction 0.4 percent in the year-ago period.

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