IIP growth slows to 0.6% in February; may prompt RBI to cut rates
New Delhi: Sharp slippage in industrial growth to 0.6 percent in February coupled with marginal moderation in retail inflation has raised expectations of a rate cut by the Reserve Bank next month to boost growth.
Showing slump in the economy, the Index of Industrial Production (IIP) slipped to 0.6 percent in February from 4.3 percent in the corresponding month a year ago, mainly on account of contraction in power generation and mining output and poor performance of manufacturing sector.
Retail inflation, according to the Consumer Price Index (CPI) data released on Friday, declined marginally to 10.39 percent in March, snapping the five month rising trend, as prices of vegetables and protein based items eased.
Planning Commission Deputy Chairman Montek Singh Ahluwalia took some satisfaction from the fact that the IIP data was not in the negative and expressed hope the factory output would show improvement in 2013-14.
"I think it (IIP growth in February) is consistent to what we have been saying that 2012-13 was not a good year and (the economic growth in) 2013-14 would be a lot better...I am glad that it (IIP) is not negative but it is very low," Ahluwalia told reporters.
These two numbers -- IIP and CPI--, according to experts, would prompt the RBI to cut interest rate in the annual credit policy due on May 3 with a view to encouraging investment and boosting growth.
Commenting on these numbers, Crisil Chief Economist D K Joshi said: "interest rate will come down as growth is weak. I think RBI will cut rate slightly... CPI numbers and industrial production numbers are beyond comfort level."
PHDCCI President Suman Jyoti Khaitan pitched for 100 basis points (1 percent) cut in short-term interest rate by the RBI in its forthcoming credit policy, saying such a step was necessary to improve investor sentiments and promote growth.
Capital goods output grew by 9.5 percent in February, as against a growth of 10.5 percent in same month of 2012.
Capital goods output contracted in the April-February period by 7.6 percent, as against a dip of 1.8 percent in the same period of 2011-12.
The consumer goods output saw meagre growth of 0.5 percent in February, compared to a decline in production by 0.4 percent in same month last year.
In the April-February period of the last fiscal, the growth in the segment was 2.5 percent as compared to 4.7 percent in the same period of 2011-12.
The dip in the output of consumer durables stood at 2.7 percent in February, as compared to a contraction of 6.2 percent in the same month of 2012.
The growth in the output of these goods remained flat at 2.7 percent in April-February period of last fiscal.
The consumer non-durables output grew by 2.9 percent in February, compared to 4.4 percent in the same month last year. This segment's growth was at 2.3 percent in the 11-month period of last fiscal, as against 6.4 percent in the previous fiscal.
The intermediate goods production also saw a dip of 0.7 percent in February, compared to a growth of one percent in the same month last year.
During the April-February period, this segment recorded a growth of 1.5 percent, compared to a contraction of 0.7 percent in the first 11 months of 2011-12.
The basic goods output saw a contraction of 1.8 percent in February compared to a growth of 7.6 percent in the same month last year.
During April-February period of 2012-13, the production of basic goods grew by 2.3 percent compared to a growth of 5.9 percent in the 11 month period of previous fiscal.