Lockdown Weighs Down On Productivity

Rajani Sinha, Chief Economist & Head Research at Knight Frank India gives her perspective on the IIP and CPI numbers With large part of economic activities coming to a standstill in March, the sharp contraction in IIP does not come as a surprise. In the next few months, economic and industrial activities are likely to resume in phases depending on the lifting of lockdown. However, any recovery in industrial production will only be gradual as the sector in the short to medium term will continue to struggle with sluggish demand, supply chain bottlenecks, raw material availability, labour issues and credit squeeze.” CPI inflation has been inching down in the last three months. Going forward, CPI inflation is likely to fall further in line with the lacklustre demand in the economy. In the near-term, supply bottlenecks could exert upward pressure on some components of inflation, but overall inflationary pressure would remain low due to weak demand. Low global commodity prices will also provide comfort to domestic inflation.