IIP Down in Feb, CPI Inflation Up in March

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IIP Down in Feb, CPI Inflation Up in March
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- IIP (Index of Industrial Production) continues on its bumpy road in 2021 after it fell for the second consecutive month in February by 3.6%. In January, the index had contracted by 0.9% compared to an increase of 1.6% in December 2020.

This fall is mainly attributed to a steep contraction in manufacturing output, according to data by the Ministry of Statistics and Programme Implementation (MoSPI). Manufacturing output contracted by 3.7% in February, while mining output fell 5.5%. Factory output, however, expanded 4.5% in February compared to a contraction of 1.6% in January.

Meanwhile, CPI (Consumer Price Inflation) has risen to 5.52% in March from 5.03% in February. Food inflation zoomed up to 4.94% in March from 3.87% in February. Fuel and light inflation also moved up to 4.5% from 3.53% in February.

This inflation has hurt RBI’s projection of retail inflation at 5% in the January-March quarter of FY2021 and at 5.2% in Q1 and Q2 of FY2022.

However, higher inflation was always a possibility as RBI kept rates unchanged at 4% in its latest MPC (Monetary Policy Committee) meeting. This was done to ensure that there is ample liquidity in the system so that the fragile economic recovery after the destructive impact of the COVID-19 pandemic could continue.

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