The Consumer Price Index inflation, which measures the change in retail prices, had fallen to 5.07% in January.
High on the strong growth seen in the manufacturing sector, India's industrial production registered 7.5 per cent growth in January, the data released by the Central Statistics Office stated on Monday.
Retail inflation fell to a 4-month low of 4.44 percent in February on cheaper food articles and lower cost for fuel.
A lower inflation is considered to be an ideal situation for central bank to slash prices to aid industrial and commercial activity. The price of vegetables has risen by 17.57% in February compared to the corresponding period in 2017 while the price of eggs rose 8.51%, and that of milk and related products increased 3.83%.
But, on a cumulative basis, the IIP expanded by 4.1 per cent between April and January 2017-18, which was lower than the 5 per cent growth in the same period a year ago. Food price inflation was at 4.7% in January.
The IIP growth in January this year was mainly on account of an uptick in the manufacturing sector which constitutes 77.63 per cent of the index.
Experts suggest the consistent growth in the industrial production could boost the overall economic growth in the fourth quarter.
Before this, factory output grew at a sharpest pace in November 2017 at 8.8 per cent.
Analysts polled by Reuters had forecast February's consumer price inflation to ease to 4.80 per cent from 5.07 per cent in the previous month.
Consumer non-durable goods, which are mainly fast moving consumer goods, too showed an increase of 10.5% as against a growth of 9.6%.
As per use-based classification, the growth rates in January 2018 over January 2017 are 5.8% in primary goods, 4.9% in intermediate goods and 6.8% in Infrastructure/ Construction Goods. Capital goods, which point to rising investment demand in the economy, recorded positive growth for the sixth straight month, growing at 14.6%, signalling a revival in private investment.
The mining sector, however, was a laggard at 0.1% growth compared to 8.6% a year ago.
Chandrajit Banerjee, director general, CII said: "The visible improvement in industrial output, which rose to 7.5 per cent at the onset of the New Year as against 3.5 per cent last year, augurs well for the return of broad based recovery in industrial performance during the year". In all 16 out of 23 industry groups in the manufacturing sector showed growth in January.
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