Macros Data On Expected Lines

Retail inflation measured by Consumer Price Index (CPI) continues its downward journey and for the month of January it hit a 24 month low. CPI inflation for January came at 8.79% against 9.87% for the month of December 2013. Slowdown in food inflation at 9.9% for January compared to 12.16% in the previous month (December 2013) and fall in the vegetable prices helped retail inflation to record lower numbers. The core inflation, however, remained above 8% and there was marginal uptick remains an area of worry. 

IIP Shrinks

The Index of Industrial Production (IIP) for the month of December contracted by 0.6% on yearly basis. The contraction is lesser than what many economists were expecting of around 1 per cent. For the period between April - December it has declined by 0.1% compared to the similar period last year. Out of total 22 industry groups tracked in the manufacturing sector eight have witnessed a decline for the month of December compared to same month of last year. In terms of industry group that saw huge decline is Radio, TV and communication equipment & apparatus (-35.7%) followed by Furniture manufacturing (-26.1%). The industries that witnessed expansion are Wearing apparel; dressing and dyeing of fur’ has shown a positive growth of 19.7% followed by 13.5% in ‘Chemicals and chemical products’.

In terms of use based capital goods continues to shrink and contracted by 3% for the month of January. Even consumer goods and consumer durables has contracted by 5.3% and 16.2% respectively. 

The above macro-economic data indicates that RBI will maintain its stance of status quo on interest rate front and unless we saw a sharp rise in CPI inflation in the month of February the key policy rates are likely to remain unchanged in the next RBI meeting in the month of April.