Jan IIP grows at 6.8%, fastest in 7 months
New Delhi: Driven by strong performance of the manufacturing sector, industrial output rose to 7-month high of 6.8 percent in January, suggesting that economic recovery may be round the corner.
On the back of 8.5 percent growth in manufacturing during the month, the Index of Industrial Production (IIP) grew at a faster pace than 2.5 percent recorded in December.
On the other hand, output of the mining and capital goods sectors contracted by 1.5 percent and 2.7 percent respectively during the month.
"January (IIP)... is strong recovery in the backdrop of last December's figure," Finance Minister Pranab Mukherjee said.
Deputy Chairman Planning Commission, Montek Singh, however, said that one will have to wait for February data before concluding that downturn is over.
Although the growth in industrial output during January 2012 at 6.8 percent, it is less than 7.5 percent recorded in the same month last year. On sequential basis, this is the highest growth since June 2011 when it was 9.5 percent.
During the April-January period this fiscal, the IIP growth stood at 4 percent , as against 8.3 in same period in 2010-11.
The recovery may refrain the Reserve Bank, which cut CRR to inject Rs 48,000 crore liquidity into the system last Friday, from reducing interest rates in the mid-quarterly credit policy on March 15.
"With 75 basis points CRR cut already, RBI will wait for the Budget to take any monetary action," Crisil Chief Economist D K Joshi said. The annual monetary policy for 2012-13 will be announced on April 17.
Output of the consumer goods sector grew 20.2 percent in January, compared to 8.3 percent in the same month last year.
The production of the non-durable consumer goods segment has shown signs of improvement and grew by 42.1 percent in the month under review. Power generation, however, witnessed slow growth of 3.2 percent in January, compared to 10.5 percent in the year ago period.
During the month, 13 of the 22 industry groups witnessed growth. Output of basic goods went up by meagre 1.6 percent, as against 7.7 percent in the year ago period. However, intermediate goods witnessed a contraction of 3.2 percent, as against 7.4 percent growth in January last year.
Commerce and Industry Minister Anand Sharma said he is optimistic that the measures taken by the government in consultation with the industry will yield results.
Last month, Central Statistical Organisation (CSO) had estimated that the economy would grow at a slower pace of 6.9 percent this fiscal, as against 8.4 percent in 2010-11.
"IIP data has moved up pretty close to 7 percent is a good development. Our feeling is that we may end up with 7 percent (economic growth) this fiscal," Ahluwalia said.
"If it looks like the downturn has come to an end then we should certainly do better than 7 percent (economic growth) next fiscal," he added.
Ficci Secretary General Rajeev Kumar said, "The Budget should have more measure for investment in the economy."
Industry officials have blamed the slowdown in growth to the high interest rate regime that has made borrowings costly and curbed consumer spending.
Prime Minister's economic advisory panel chief C Rangarajan has said that the policy rate cuts by RBI would depend on inflation movement. Overall inflation has started showing sign of decline at 6.55 percent in January.
"We believe IIP growth bottomed out in Q4 2011 and should gradually recover over the course of the year, supported by lower cost pressures and a reversal of the rate cycle," Nomura Economist Sonal Varma said.