New Delhi– India’s factory output rose 5.7 per cent in November, the first month of the government’s demonetisation drive, while retail inflation declined to 3.41 per cent in December from 3.63 per cent in the month before, official data showed on Thursday. Welcoming the numbers, India Inc said these “may not yet be reflecting the impact of demonetisation.”

The factory output, as per the Index of Industrial Production (IIP), declined by 1.81 per cent in October and a 3.4 per cent slide in the corresponding month of last year.

As per the IIP data released by the Central Statistics Office (CSO), the factory output rise was mainly on account of a 5.5 per cent increase in manufacturing output, which also has the maximum weight in the overall index.

Among the other two major sub-indices, electricity generation increased by 8.9 per cent while that for mining output was up by 3.9 per cent.

The cumulative growth of the country’s factory output inched up by 0.4 per cent in the first seven months of the current fiscal, as against cumulative growth of 3.8 per cent during the corresponding period of last fiscal.

Retail inflation, according to the Consumer Price Index (CPI) data, eased last month from 5.61 per cent reported during the corresponding period last year.

The fall was mainly due to a drop in the annual food inflation — to 1.37 per cent in December from 2.03 per cent in November.

The CPI data revealed that the annual retail inflation for rural India was 3.83 per cent while that for the urban centres was 2.90 per cent. The annual food inflation was 2.06 per cent in rural areas and 0.15 per cent in the urban conclaves.

The official data disclosed that prices of vegetables plunged by (-)14.59 per cent on a year-on-year (YoY) basis, whereas cost of pulses was marginally down by (-)1.57 per cent.

The prices of milk and milk-based products surged by 4.40 per cent. Other protein-based food items such as meat and fish became dearer by 4.79 per cent.

Eggs became expensive by 6.41 per cent and the cost of spices rose by 6.06 per cent.

Edible oils and fats prices increased by 2.86 per cent, whereas sugar and confectionery edged up by 21.06 per cent on a YoY basis.

The cost of cereals and their products appreciated by 5.25 per cent, however, prices of fruits were up by 4.74 per cent.

The easing of key price indices makes the context favourable for a rate cut by the Reserve Bank of India (RBI) at its next monetary policy review due in Februray 2017.

Among the states, the retail inflation was lowest in Tamil Nadu, at 1.47 per cent, followed by Assam at 1.91 per cent, and Chhattisgarh at 1.61 per cent.

On the flip side, it was as high as 7.15 per cent in Jammu and Kashmir, 6.00 per cent in Himachal Pradesh and 5.72 per cent in New Delhi.

The IIP data revealed that among the six use-based classifications of the index, the output of consumer goods segment expanded by 5.6 per cent in November.

The consumer non-durables segment’s output inched up by 2.9 per cent, whereas the consumer durables segment increased by 9.8 per cent.

The capital goods segment, which is a key indicator of economic activity rose by 15 per cent.

The basic and intermediate goods’ output rose by 4.7 per cent and 2.7 per cent, respectively.

Overall, 16 out of the 22 industry groups in the manufacturing sector showed positive growth during the month under review.

Growth was witnessed in ‘cable, rubber insulated’ (185 per cent), ‘tractors’ (95 per cent), ‘telephone instruments including mobile phone and accessories’ (42.8 per cent), ‘passenger cars’ (29.5 per cent), while high negative growth was reported in ‘H R Sheets’ ((-) 49.7 per cent), ‘kerosene’ ((-) 35.7 per cent), ‘molasses’ ((-) 26.2 per cent) and ‘gems and jewellery’ ((-) 25.4 per cent).

Commmenting on the data President of industry chamber Ficci Pankaj Patel said in a statement: “It is heartening to note that the growth is broad based and signals a positive jump in the manufacturing production.

“Given the reduction in lending rates announced by several banks, we hope to see an increase in both consumption and investment which will hopefully have a positive impact on manufacturing growth in coming months.”

CII Director General Chandrajit Banerjee said: “Industrial output has bounced back sharply after a sluggish growth in the preceding months. These numbers may not yet be reflecting the impact of demonetization. There is need to watch for further signals in the coming months.”

Ratings agency Crisil said the lowest food inflation in 2 years was “a result of cooling prices thanks to good agricultural supply, cash crunch-led slide in price of perishables and a high base.

“Going by the production trend in some sectors such as auto, next month’s IIP growth data may be more indicative of the impact of demonetisation.”