Inflation jumped up to 5.4% in April from 4.8% last month on the back of higher food inflation. Core inflation also inched up to 5.2% led by rising housing and clothing & footwear inflation. “We believe this increase to be transitory as a normal monsoon and proactive steps by the government in food supply management will support lower food inflation this fiscal. For 2016-17, we expect CPI to stay close to 5% on average, assuming a normal monsoon. An area of concern remains 1) high protein inflation which has recorded double digit growth for 11 consecutive months and 2) service inflation, especially in rural areas, which is keeping core inflation high and sticky,” says CRISIL Research.
On IIP it says “Even as it remained positive, IIP growth fell sharply to 0.1% on-year in March from 2.0% in February, despite a low base of last year. While manufacturing growth again turned negative (-1.2%), mining activity unexpectedly fell by 0.1% in March, the first decline since June 2015. Capital goods continued to be major drag on industrial activity reflecting weakness in investment activity while consumer durables output saw mild upturn on-year reflecting some improvement in demand. In fiscal 2017,
assuming a normal monsoon, an uptick in the rural economy will drive consumption. The lagged impact of interest rate reductions, salary revisions and easier monetary conditions will also support demand and boost industrial capacity utilisation. We expect GDP to rise to 7.9% in fiscal 2017 from 7.6% in fiscal 2016 and industry GDP to grow at 7.6% driven by manufacturing and construction activity.”