Slower factory output growth dampens hopes of turnaround

13 Aug '14

2 min read

Indian data released on Tuesday showed that consumer price inflation rose in July and in its previous month, factory output grew at a slower pace.

This could dampen hopes of an early economic turnaround and increase the pressure on government which is struggling to revive growth and contain prices.

From a 19-month high of 5 percent in May 2014, sharp deceleration in manufacturing activity led to factory output growth slowing to 3.4 percent in June.

Inflation measured by the consumer price index (CPI) rose from 7.46 percent in June to 7.96 percent in July, mainly from higher vegetables, fruits and milk prices.

The biggest blow came from the manufacturing sector, which saw its growth decelerate to 1.8 percent in June from a high of 5.1 percent in May.

However in the same month, the mining sector grew at a robust pace of 4.3 percent year-on year and electricity sector rose by 15.7 percent, also from a year earlier.

During the April-June period of the current fiscal, IIP has surged and recorded a growth of 3.9 percent, as against contraction of 0.5 percent, a year earlier.

The consumer durables segment fell by 23.4 percent in June compared with a dip of 10.1 percent in June 2013. In the first fiscal quarter ending June 2014, it dipped by 9.6 percent against a decline of 12.7 percent in the first quarter of last fiscal year.

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