New Delhi, Mar 13 (IANS): India's economic health showed signs of recovery as January's factory production rose, while retail inflation decelerated on a sequential basis in February.

Accordingly, higher electricity generation coupled with a rise in mining activity expanded India's January factory output by 2 per cent from a growth of 0.07 per cent reported for December 2019 and 1.6 per cent recorded during the corresponding period of last year.

"The 'Quick Estimates of Index of Industrial Production' (IIP) with base 2011-12 for the month of January 2020 stands at 137.1, which is 2 per cent higher as compared to the level in the month of January 2019," the Ministry of Statistics & Programme Implementation said.

"The cumulative growth for the period April-January 2019-20 over the corresponding period of the previous year stands at 0.5 per cent."

As per the data, the output rate of the manufacturing sector rose by 1.5 per cent in January from a YoY rise of 1.3 per cent.

Similarly, mining activity grew by 4.4 per cent from a YoY growth 3.8 per cent and the sub-index of electricity generation was higher by 3.1 per cent from a rise of 0.9 per cent.

Among the six use-based classification groups, the output of primary goods, which has the highest weightage of 34.04, rose by 1.8 per cent. The output of intermediate goods, which has the second highest weightage, zoomed 15.8 per cent.

While consumer non-durables output fell by (-) 0.3 per cent, similarly, the consumer durables declined (-) 4 per cent. Output of infrastructure or construction goods decreased by (-) 2.2 per cent, similarly, capital goods' production receded by (-) 4.3 per cent.

In terms of industries, 11 out of the 23 industry groups in the manufacturing sector showed positive growth during the month under review as compared to the corresponding period of the previous year.

"On the IIP front, the January 2020 numbers brought some optimism with all the three major sectors reporting positive growth. This is in line with the PMI index reaching a seven-year high of 55.3 points in January, reflecting improvement in demand conditions," said M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings.

"However, the prevailing uncertainty and supply disruptions due to coronavirus pandemic may halt the growth momentum again in the coming months, hence we expect the IIP growth to remain subdued in the near term."

According to Karan Mehrishi, Lead Economist at Acuité Ratings & Research: "The IIP print of January 2020 show moderate green shoots in the economy with the expansion of the production of intermediate goods by 15.8 per cent."

"It is possible that the intermediate goods producers in India have been able to capitalize on the supply chain disruption in China arising from the virus scare."

In terms of retail inflation, a different set of data showed a marginal rise in February to 6.58 per cent from January's 7.59 per cent.

However, the consumer price index (CPI), or retail inflation, was at 2.57 per cent in the corresponding month of last year.

The data furnished by the National Statistical Office showed that even though the consumer food price index remained at an elevated level, its rise was slower during February at 10.81 per cent, compared with 13.63 per cent recorded in January 2020 and (-)0.73 per cent in the corresponding period of last year.

However, the data showed that the retail inflation level continued to remain much above the RBI's medium-term target for the CPI rate of 4 per cent with a band of +/- 2 per cent.

Product-wise, prices of vegetables, eggs, meat, fish and pulses pushed the retail inflation higher on a year-on-year (YoY) basis.

Prices of vegetables in February increased 31.61 per cent, meat and fish by 10.20 per cent, eggs by 7.28 per cent and pulses and their products by 16.61 per cent.

Similarly, the prices of 'fuel and light' category rose to 6.36 per cent on a YoY basis.

"The CPI inflation recorded an appreciable correction in February 2020, led by vegetables and some miscellaneous categories, and mildly undershot our forecast of 6.7 per cent, even though it continued to breach the 6 per cent upper threshold of the MPC for the third consecutive month," ICRA's Principal Economist Aditi Nayar said.

Sunil Kumar Sinha, Principal Economist at India Ratings & Research: "CPI inflation in February 2020 reversed six months increasing trend and came in at 6.58 per cent."

"Going forward retail inflation is likely to correct further due to weak demand, weak oil prices, gradual decline in food prices due to base effect (food prices were in deflationary mode between October 2018 and February 2019)."