The dark clouds of demonetisation may still be hanging over the economy as factory output slowed in April with laggard manufacturing output. However, retail inflation eased in May as food items became cheaper.

Data released on Monday revealed that the Index of Industrial Production rose by 3.1 per cent in April led by robust growth in electricity generation.

IIP grew by 6.5 per cent in April last year. The CSO also revised upwards the IIP growth figure for March to 3.75 per cent from its provisional estimate of 2.7 per cent.

While electricity generation grew by 5.4 per cent, mining expanded by 4.2 per cent. However, manufacturing output grew by a laggard 2.6 per cent in April this year.

“In terms of industries, 14 out of the 23 industry groups in the manufacturing sector have shown positive growth in April 2017,” said an official statement.

However, according to use-based classification, capital goods production, which denotes investment contracted by 1.3 per cent in April as against 9.6 per cent growth in March.

Other items of industrial use such as axles registered a decline of 60.3 per cent in production in April; manufacture of commercial vehicle dipped by 28.8 per cent.

The data comes just after the second bi-monthly monetary policy review on June 6 and 7 that left lending rates unchanged while reducing the statutory liquidity ratio by 0.5 per cent to 20 per cent despite calls for a cut in rates to boost investments and demand.

Reflecting the muted consumer sentiment, production of consumer durables fell by 6 per cent in April as against a decline of 3.85 per cent in March. Consumer non-durables however, grew by 8.3 per cent, which was more robust than the 6.17 per cent growth in the previous month.

Lagged impact Analysts were not very enthused by the data. “This could be due to the lagged effect of demonetisation which may play out even in the first quarter of 2017-18 and had pulled down the overall industrial GDP growth to 3.1 per cent in the fourth quarter of last fiscal,” said Sunil Kumar Sinha, Principal Economist, India Ratings.

Seeking a more accommodative monetary policy, Pankaj Patel, President, FICCI, said, “Industry is looking forward to forthcoming foreign trade policy review to further encourage manufacturing exports.”

Manufacture of primary or basic goods grew by 3.4 per cent in April as against a growth of 5.9 per cent in March while output of intermediate goods rose by 4.6 per cent as against 2.7 per cent in March. Production of infrastructure goods grew by 5.8 per cent in April as against 0.89 per cent in March.

Retail inflation The Consumer price index (CPI) based inflation eased to 2.18 per cent in May from 2.99 per cent in April.

Consumer food price inflation contracted by 1.05 per cent in May as against a rise of 0.61 per cent in April. Prices of pulses dipped by close to 20 per cent in May while vegetables became cheaper by 13.44 per cent.

Retail inflation in fuel and light eased to 5.46 per cent in May from 6.13 per cent in April.

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