Retail inflation in India rose to 3.81 percent for March from 3.65 percent in the previous month, but still remained below the RBI's target of ~5 percent. On the other hand, factory output for February showed a 1.2 percent decline, after the 2.7 percent increase in January.
On the inflation front, the increase was sharp for items such as sugar and fruits, while prices of vegetables and pulses actually dropped, according to the provisional data released by the Narendra Modi government on Wednesday evening.
Sugar prices saw the biggest spike, of 17 percent, in view of India's output projected to fall due to drought-like conditions prevailing in some sugarcane-producing states.
In January, output estimates were revised to 21.3 million tonnes for sugar crop season October 2016-September 2017 (SS 2016-17) from 23.4 million tonnes given last September by industry body ISMA.
Factory output for February dropped 1.2 percent after witnessing 2.7 percent growth in the previous month. From a sectoral viewpoint, 15 out of the 22 industry groups recorded a fall on a year-on-year basis, the government said in the update for index for industrial production (IIP), or factory output.
"The cumulative growth for the period April-February 2016-17 over the corresponding period of the previous year stands at 0.4 percent," the official statement said.
An analyst at India Ratings called it disappointing.
"Not only the IIP data for the month of February 2016 is disappointing, even at aggregate level that is April-Feb FY17 it shows a flat growth as compared to 2.6% growth during the same period in FY16. The situation at the manufacturing level is even worse. This clearly shows the fragile nature of industrial/ manufacturing growth which has been languishing consecutively for several years now," Sunil Kumar Sinha, Principal Economist, India Ratings & Research, said in a statement.
Radhika Rao, economist at DBS Bank, had expected retail inflation to come in at 3.9 percent.
The data was released after the stock markets closed for the day, so the impact if any, will be reflected in Thursday trading.
On Wednesday, the markets closed in the red, with the Sensex ending 145 points down at 29,643 while the NSE Nifty closed at 9,203, down 33 points.
Foreign institutional investors (FIIs/FPIs) were net sellers of Indian equities worth Rs 581 crore while domestic institutional investors (DIIs) were net buyers at Rs 701 crore.
