India’s industrial production index rose at a better-than-expected rate of 8.2 per cent, fastest in more than a year in October after unexpected slowdown last month. The rise in industrial output was helped by a big surge in manufacturing, power and capital goods production.
The manufacturing sector, which constitutes over 75 per cent of the index, grew by 9.6 per cent in October, as against a fall of 6 per cent in same month last year. Analysts said that this was one-off surprise as ground reality remains the same. And also the increase in IIP was on the back of low-base effect of last year.
Finance Minister P Chidambaram, however, said he was encouraged by the indications of “green shoots” in economy.
However, inflation, close to 10 per cent in November, may not be a very encouraging sign either for the government or the Reserve Bank of India, which has been trying to strike a balance between growth and inflation for the past many months with little success.
"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 said reacting to the numbers.
Reacting to IIP data, the Confederation of Indian Industry said the increase could be attributed to a strong base effect and also the festive season effect. It, however, said that it was too early to say there was a turnaround.
“We have to keep in mind is that every year, prior to the festive season, IIP picks up and then there is a drop. Therefore, it would be too early to say that a turnaround is underway,” the CII director-general said in a statement.
Industry chamber Ficci said given the base effect, “it remains to be seen to what extent the 9.6 per cent growth of manufacturing sector in October” would be sustainable.
Meanwhile, India's annual consumer price inflation surged to 9.90 per cent in November as food prices rose close to 12 per cent.
The consumer price index inflation was 9.75 per cent in October and 9.73 per cent in September.
Economy watchers said it was the inflation number which may put an added pressure on the RBI.
When it comes to policy rate review, the RBI gives weightage to the inflation number rather than the IIP, which is said to be more volatile. The RBI has kept interest rates unchanged since April as inflation has refused to relent despite the slowdown in economic growth to a decade-low last year.