Relief on the economy front amid Corona crisis, boom in industrial production; Decrease in inflation


On the economic front, Wednesday was a relief for the country facing the second severe wave of corona virus epidemic. According to the latest data, industrial production jumped by 22.4 percent in March, while retail inflation fell to a three-month low of 4.29 percent in April. One year ago & lsquo; lockdown & rsquo; Due to poor economic activity due to complete lack of comparative base and better performance of manufacturing sector, industrial production registered a good growth in March 2021. This information was given in the data released on Wednesday by the National Statistics Office (NSO).

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Boom in industrial production

However, if we talk about the whole year, there has been a decline of 8.6 percent in the industrial production in the financial year 2020-21. Earlier, in January and February 2021, industrial production based on the Index of Industrial Production (IIP) contracted by 0.9 percent and 3.4 percent respectively. After this, industrial production registered a good growth in March due to better performance of mining, manufacturing and power sectors. Also, the comparative basis of last year was also a benefit of being weak. & Lsquo; Lockdown & rsquo; in March 2020 for prevention of Kovid epidemic. Was imposed This led to an 18.7 percent drop in IIP.

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Slower inflation rate

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There was relief in the case of inflation also. According to government figures, the rate of retail inflation has slowed to 4.29 percent in April due to decrease in prices of vegetables, cereals and other food and drink items. This is the lowest inflation figure in the last three months. A month ago, retail inflation was 5.52 percent in March. While deciding monetary policy, the RBI mainly looks at retail inflation. Vegetable prices declined by 14.2 percent on an annual basis. Sugar and confectionery-related products fell 5.99 percent, while cereal prices were down 2.96 percent.

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Meat-fish and edible oil are expensive

In the food category, the prices of meat and fish, edible oil, fruits and pulses remain high compared to both yearly and quarterly. This reflects structural supply bottlenecks and was imposed in some states to prevent the second wave of Kovid-19 & lsquo; lockdown & rsquo; This can worsen the situation. In addition, core inflation remains strong. The reason for this is the rise in retail fuel prices.

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ICRA Limited Principal Economist Aditi Nair said the retail inflation base remained high due to supply constraints during the nationwide lockdown in April 2020, noting that consumer price index (CPI)-based inflation in April 2021 fell to a three-month low. Gone. However, this figure also seems to be higher than expected. He said that it seems that overall local restrictions have limited impact on prices during the month of April.

Inflation expected to reach 5 percent

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Nair said that as soon as the figures from the lockdown affected months of last year come forward, inflation can once again reach the average of five percent. If this happens, the expectation of further cuts in interest rates may be ruled out. He said that at present, the economic scenario remains uncertain in view of the epidemic and in such a situation, we hope that for most of 2021, the monetary policy stance will continue to be moderate. Regarding the IIP, Chaudhary said that the locally installed & lsquo; lockdown & rsquo; Despite the constraints, the power generation has reached the level of around 2019-20 in the financial year 2020-21. This is the result of maximum demand for electricity in the houses, which is compensating the reduction in demand for industrial and commercial activities.

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He said, & lsquo; & lsquo; manufacturing is booming due to weak base on a yearly basis. But in March this year, activity in the export-oriented sectors and especially in the field of refined petroleum products was up. & Rsquo; & rsquo; According to Chaudhary, & lsquo; & lsquo; however, there is a question mark as to how the manufacturing sector will continue ahead. The reason for this is the obstacles created in April and May due to the Kovid epidemic … & rsquo; & rsquo; According to the NSO data, the manufacturing sector, which has a 77.63 percent share in the Index of Industrial Production (IIP), registered a growth of 25.8 percent in March 2021. Mining sector output grew by 6.1 percent while electricity generation increased by 22.5 percent.

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