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Economy Nov 12, 2012

Sept IIP falls 0.4%; renewed pressure on RBI to cut rate likely

By Firstbiz Editors

India's industrial production unexpectedly declined 0.4 percent in September, likely increasing the political pressure on the RBI to cut rates sooner than it has indicated.

A Reuters poll of 25 economists had seen 2.8 percent rise in output.

The government also revised August IIP downwards to 2.3 percent from 2.7 percent earlier.

Chairman of the Prime Minister's Economic Asvisory Council, C Rangarajan, termed the IIP figure a little unexpected. He pegged the full year growth at 5.5 to 6 percent. He said he expected inflation to show a downward trend by December.

Reuters

Factory output accounts for a little more than 15 percent of India's economy, which has grown at annual rates of 5 to 5.5 percent each quarter since the start of the year, the slowest rates in nearly three years.

In September, consumer non-durables grew 1.1 percent as against 2.7 percent a year ago. Consumer Durables output declined 1.7 percent compared with 8.9 percent a year ago.

Consumer goods output also witnessed a decline of 0.3 percent as against 5.7 percent a year ago.

"Data points today, IIP in negative territory, CPI close to double digit. It sort of reinforces the kind of the data flow that India has seen over the last few months. I think there was some real hope this particular month and perhaps the industrial slowdown had bottomed," Siddhartha Sanyal of Barclays Capital told CNBC TV18.

Dubbing capital goods as the wild card, he said without a pick-up in the investment cycle, either private or public, and turn around in the capital goods sector, any type of recovery is going to be either transient or very modest.

Read the full press release here.

by Firstbiz Editors

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