Economics Prelims cum Mains

April IIP rises to 3.4%; May retail inflation spikes to 7-month high

The news

  • The data of Index of Industrial Production (IIP) and Consumer Price Index (CPI) has been released by the Ministry of Statistics and Programme Implementation (MoSPI).

 

Summary of the news

 

IIP data for the month of April 2019-

  • Overall growth
    • Factory output rose to a six-month high of 3.4 per cent. The last high growth in IIP was recorded at 8.4 per cent in October 2018.
    • The IIP growth for March 2019 has also been revised to 0.4 per cent from (-)0.1 per cent earlier.
  • Growth in different sectors under IIP
    • Mining sector output grew at 5.1 per cent, while the electricity output grew at 6 per cent.
    • Manufacturing output remained subdued with 2.8 per cent growth rate.

 

 

CPI data for May 2019

  • Overall data
    • Retail inflation, based on Consumer Price Index (Combined), jumped to a seven-month high of 3.05 per cent. It is highest since October 2018 when it stood at 3.38 per cent.
    • Consumer Food Price Index (CFPI) inflation stood at 1.83 per cent.
  • Data for sub-categories
    • The ‘food and beverages’ segment registered an inflation of 2.06 per cent.
    • Meat and fish recorded inflation of 8.12 per cent.
    • Fruits registered deflation of 5.17 per cent.
    • Vegetable inflation at an 11-month high of 5.46 per cent.
    • Pulses witnessed inflation after a gap of 29 months.

 

 

Inferences /Potential impact of this data

  • Industrial growth: The manufacturing sector is still below 3 per cent growth rate, which is affecting overall industrial growth as well as employment scenario.
  • Budget: The data is critical as the General Budget is scheduled to be presented on July 5. It will help in preparing budget for stimulating growth in economy.
  • More rates cut by RBI: Despite increase in inflation, it is still below 4 per cent of the mean inflation target, which opens the possibility for further interest rates cut by the RBI.

 

About the Index of Industrial Production IIP

Related image

  • Basics:
    • Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country.
    • It is a composite indicator expressed in terms of an index number. It measures the short term changes in the volume of production of a basket of industrial products during a given period.
    • It tells whether the manufacturers of industrial goods have either increased or cut their production.
  • Industries covered under this index:The index is made up of eight industries or manufacturers in the following sectors: Coal, fertilizer, electricity, crude oil, natural gas, refinery products, steel, and cement.
  • Items covered:
    • Industrial Production in the IIP comprises three distinct groups of industry, (a) Mining, (b) Manufacturingand (c) Electricity.
    • The weights of the three sectors are 14.16%, 75.53% and 10.32% respectively.
    • It covers 682 items drawn from mining (61 items), manufacturing (620 items) & electricity (1 item).
  • Data: IIP numbers are released on monthly basis and calculated by Central Statistics Office.
  • Base year: The base year for the IIP series in India is 2004-05.

 

 

About the Consumer Price Index (CPI)

  • Basics:
    • CPI is a measure of change in retail prices of goods and services consumed by defined population group in a given area with reference to a base year.
    • This basket of goods and services represents the level of living or the utility derived by the consumers at given levels of their income, prices and tastes.
    • It is an important economic indicator and is widely considered as a barometer of inflation, a tool for monitoring price stability and as a deflator in national accounts.
  • Compiled index: The consumer price indices compiled in India are CPI for Industrial workers CPI(IW), CPI for Agricultural Labourers CPI(AL) & Rural Labourers CPI(RL) and CPI (Urban) and CPI(Rural).
  • Data: It is released on monthly basis for urban and rural India.
    • The CPI(IW) and CPI(AL& RL) compiled are occupation specific and centre specific and are compiled by Labour Bureau.
    • CPI(Urban) and CPI(Rural) are compiled by Central Statistical Organisation
  • Base year:The base year for the IIP series in India is 2011-12.
  • Items covered:Food, beverages, tobacco, fuel & light, housing, clothing, bedding and footwear, and miscellaneous.
  • Weightage to different items
Item Rural Urban Combined
Food and beverages 54.18 36.29 45.86
Pan, tobacco and intoxicants 3.26 1.36 2.38

 

Clothing and footwear 7.36 5.57 6.53
Housing NA 21.67 10.07
Fuel and light 7.94 5.58 6.84
Miscellaneous 27.26 29.53 28.32

 

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