“While a fall in inflation was expected, the extent has been more than anticipated as vegetable prices have shown a sharp correction,” Mr. Shah said.
“Importantly, prices of pulses have also come down showing that the supply side measures undertaken by the authorities are having a dampening effect.” With data on sowing acreage showing increases, price gains are expected to moderate further. “Every analyst was expecting a sharp drop in CPI,” said D.K. Joshi, Chief Economist at Crisil. “It will drop further because pulses inflation is at 22 per cent and will come down Manufacturing sector has contracted by 3.4 per cent in July essentially on the back of the volatile cable, rubber insulated category,” Richa Gupta, Senior Economist, Deloitte India said. “Electricity and mining growth were also weak.”The electricity sector grew 1.6 per cent in July, lower than 8.3 per cent in June, while the mining sector grew 0.8 per cent, down from 5.3 per cent.By usage, the consumer durables category grew 5.9 per cent in July, from 5.6 per cent in the previous month.However, there are problems with relying on the IIP as an economic metric, experts said, owing to its dated base year and its variance from the present methodology for calculating economic growth.The IIP is a very old based index. It is based on 2004-05 while everything else is at 2011-12,” said Mr. Joshi. “It is high time we got a more up to date industrial production index. One can’t conclude where industry is heading based on these numbers.”
There is a growing disconnect between IIP and Gross Value Added (GVA) data, according to Sunil Kumar Sinha, Principal Economist, India Ratings & Research. “IIP puts 1Q manufacturing growth at -0.8 per cent and the GVA manufacturing puts it at 9.1 per cent.”