Breather for economy, but food prices still a concern

India’s industrial output grew by 2.6% in July, expanding for the first time in three months, and retail inflation fell in August to 9.52% but analysts cautioned it may be too early to read these as the beginning of a sustained economic rebound.

India’s industrial output grew by 2.6% in July, expanding for the first time in three months, and retail inflation fell in August to 9.52% but analysts cautioned it may be too early to read these as the beginning of a sustained economic rebound.

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The growth in the Index of Industrial Production — a gauge for measuring production in factories — was largely driven by an unexpected 15.6% jump in capital goods output in July from a contraction of 5.8% last year.

Retail inflation, measured by the Consumer Price Index that captures shop-end prices, stood at 9.52% in August from 9.64% in July. But food inflation stood at a worrisome 11.06%, driven by costly vegetables, data released on Thursday showed.

Expectedly, the government, battling to pull the economy out of a crippling slowdown, cheered the data. “It’s good news. I believe the phase of negative growth is coming to an end,” said C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.

Experts, however, said corporate investment activity was still muted to suggest a definitive rebound in the economy, and a lot would depend on rise in rural incomes driven by a normal monsoon.

“While a normal monsoon and consequent pick-up in rural incomes could push up consumption growth, a sustained revival of the manufacturing sector will be contingent on a pick-up in corporate investments,” credit rating agency Crisil said in a research report.