Highlighting growth concerns in an already slowing economy and belying market expectations, the February industrial production output data came in at 4.1 per cent from 6.7 per cent a year ago mainly due to a contraction in consumer durables and non durables.
But more shocking was a huge downward revision in January numbers at 1.1 per cent from 6.8 per cent provisional. The Central Statistical Organisation, responsible for bringing out the IIP numbers, said the January figures were revised after an error in sugar output numbers were spotted.
Responding quickly to the disappointing industrial growth performance, Finance Minister Pranab Mukherjee said the government and Reserve Bank of India will take steps to revive activity in the economy. “These (IIP) figures will have bearing on monetary policy announcement scheduled for next week,” he told reporters here.
He further said “uncertainty in the global economy coupled with monetary tightening in the past have impacted investment recovery”. Mukherjee attributed the negative growth in the consumer goods sector to considerable moderation in domestic demand.
The good news for this year, he added, “is strong performance in electricity sector which has recorded a growth of 8 per cent in April-February (2011-12) period as against 6 per cent in same period last year.”
The Reserve Bank of India is scheduled to announce the credit policy on April 17 amid demand for cut in short-term lending rates. Analysts say this will have a bearing on improved investment activities in the economy.
The distortion in January data was mainly because of wrongly reported sugar output figures, which were printed at 13.4 million tonne, while the actual output was just 5.8 million tonne. This threw the consumer non-durables numbers at an exceptionally high level distorted the data for entire month.
The IIP data comes on the back of sluggish expansion in manufacturing and services sectors and compounds growth worries in the economy, analysts said.
Manufacturing output, which constitutes nearly 76 per cent of total industrial production,
declined to 4 per cent in February versus 7.5 per cent year-on-year. Mining sector growth, which kept underperforming in the past months, came in at 2 per cent, while capital goods improved month-on-month to be at 10.6 per cent. Core sector, which contributes almost 38 per cent to industrial production, grew by a sharp 6.8 per cent in February from a year earlier. Core sector comprises key infrastructure industries of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.
Harish Galipalli of JRG Securities said all indicators point towards a slow down in the economy but said, “the RBI may take a cautious approach on rate hike as inflation is still kind of suppressed due to since the government is yet to increase prices of fuels to match the higher cost of crude oil now at roughly $122.50 per barrel”.
