Subdued IIP growth, rise in retail inflation worry India Inc

India Inc has expressed concern over the uptick in retail inflation and soft industrial growth data, while emphasising the need for some bold measures with a renewed thrust on manufacturing to instill confidence among investors and script a turnaround in the economy.

"Growth in industrial production, which has been on the ascendant for the last two months, has shown a decline in June on the back of sluggish performance of the manufacturing sector," CII Director General Chandrajit Banerjee said.

With proper interventions in the areas of land, labour and environment norms, manufacturing can post a quick revival. Industry also looks forward to change in the areas of land acquisition and other factors that could promote ease of doing business, he added.

Showing signs of sluggishness in the economy, growth rate of industrial production slowed to 3.4 per cent in June, as against 5 per cent in May, mainly due to lower output of consumer goods.

"It is encouraging to see growth of manufacturing in first quarter, highest since second quarter of 2011-12. Although the growth comes on a negative base but it seems to have bottomed out," said Ficci President Sidharth Birla.

"We are hopeful that the steps taken by the Government so far and measures announced in the budget would help in further revival of the sector," he added.

Meanwhile, retail inflation inched up to 7.96 per cent in July, mainly due to higher prices of food items such as vegetables, fruits and milk.

"The subdued growth in factory output and rise in retail inflation are a clear pointer that it is early days for seeing a decisive rebound in industrial growth and reversal of inflation. The data suggests that some bold measures are required to instill the real confidence among the consumers and investors," Assocham President Rana Kapoor said. "High interest rates, high corporate debts and risk aversion remain worrying areas," he added.

PHD Chamber President Sharad Jaipuria said the positive growth in the IIP during the first quarter is encouraging and indicates strong recovery in the coming times.

During the April-June period of the current fiscal, IIP has recorded a growth of 3.9 per cent, as against contraction of 1 per cent in the first quarter of 2013-14.

The consumer durables segment declined by 23.4 per cent in June, as against a dip of 10.1 per cent a year ago.

For April-June, it declined by 9.6 per cent as against a dip of 12.7 per cent in the first quarter of last fiscal. "Growth of consumer goods is still in the negative trajectory which indicates higher interest rate regime in the economy.

We believe RBI should soften monetary policy stance to revive the consumer demand conditions and to refuel the economic growth trajectory," Jaipuria said.

Deloitte India, Senior Director, Anis Chakravarty said: "Better sustainable performance is required at the mid-term level if indeed once is to pronounce a manufacturing recovery. We believe that some of the steps taken in the recent budget on reviewing the financial architecture of SMEs and boosting productivity along the industrial corridors if implemented correctly will provide a stable base for recovery".

"Overall, the IIP numbers are an important contributor to the quarterly GDP performance. We do expect marginal improvements in GDP for Q1 of the current fiscal based on improving industry numbers," he added.