Inflation rate declines in December riding on strong manufacturing indices

stainless steel factory India

A glance at the Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of November 2017 has been released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation. Construction goods jumped to 6.7 percent during December after growing at its fastest pace in nearly five years at 13.5 percent in November aided by expansion in steel and cement output.

The General Index for the month of December 2017 stands at 130.3, which is 7.1% higher as compared to the level in the last month of December 2016.

Analysts have already made an assumption IIP to come lower in comparison with month-on-month performance, where the factory output jumped to 5-year high in November 2017.

Industry group ‘Manufacture of other transport equipment’ has shown the highest positive growth of 38.3% followed by 33.6% in ‘Manufacture of pharmaceuticals, medicinal chemical and botanical products’ and 29.8% in ‘Manufacture of computer, electronic and optical products’.

Saugata Bhattacharya, chief economist at Axis Bank said that ” All indicators show that we are out of the woods as a far as manufacturing is concerned. ”

As per Use-based classification, primary goods growth rates in December 2017 over December 2016 were at 3.7%. While growth rates for Capital goods were at 16.4 %, Intermediate goods at 6.2% and Infrastructure/ Construction Goods at 6.7%.

While the Consumer durables and Consumer non-durables the government of India has recorded a higher growth of 0.9% and 16.5% respectively.

Such increase in factory outputs would lead to an increase in inflation rate and in return would boost the economy of the nation.