The rebound in the October Index of Industrial Production (IIP) estimate, released on Wednesday, was attributed in part to a low base a year earlier. The surge in the October industrial output data that touched a 16-month high growth of 8.2 per cent, viewed in the context of a worrisome jump in retail inflation at 9.90 per cent in November, could queer the pitch for a rate cut by the RBI in its mid-quarterly review on December 18.
“I am very encouraged by the indications of the green shoots in economy in terms of production. IIP figures are very encouraging,” finance minister P Chidambaram told reporters while commenting on the data. However, as to the impact of October growth on GDP for the fiscal, he said, “One swallow doesn’t make a summer. There are signs of green shoots. Let us be happy about the moment. But let us see how we go forward in the next four months... Let’s see what the next four months bring us. Investments are taking place, capacity is being created and consumption is happening in consumer durables and non-durables”.
The IIP, an indicator of industrial activity in the country, which recorded a contraction of 0.7 per cent in September, surged to a higher-than-expected 8.2 per cent during the latest month, as against a 5 per cent contraction during the corresponding period a year ago.
The manufacturing sector, which has the maximum weight of over 75 per cent in the index, grew 9.6 per cent, while both the capital goods and intermediate goods sectors recorded a robust growth of 7.5 per cent and 9.4 per cent respectively, as against a contraction of 26.5 per cent and 8.5 per cent during the same period a year ago. Of the 22 industry groups, 17 in the manufacturing sector showed positive growth during the month.
So far this fiscal, the IIP had shown growth only in May (at 2.5 per cent) and August (at 2.3 per cent). For the April-October period, the IIP was at 1.2 per cent as against 3.6 per cent in the same period last fiscal.
Experts, though, termed it as a surprise, were cautious to interpret the numbers given the volatility in the IIP data, especially in the capital goods sector. Further, they maintained that it is too early to call it a recovery though they expressed hope that the second half would fare much better due to the base effect.
“The jump was not entirely unexpected. The market was already anticipating a growth rate of 4.5-5 per cent in October propped up by a favourable base... That said, while the October jump was perhaps already in the price, its magnitude was not,” Abheek Barua, chief economist, HDFC bank, said.
Retail inflation rises 9.90% in Nov
Rising for the second consecutive month, retail inflation surged 9.90 per cent in November driven mainly by rising prices of food items like sugar, vegetables, edible oil and clothing. Data released on Wednesday show that the rate of price rise in rural areas was more than that in urban areas. While in urban areas, retail inflation rose to 9.69 per cent during the month, the Consumer Price Index (CPI) stood at 9.97 per cent in rural areas. The retail inflation was 9.75 per cent in October. ENS