For the first time in four months, country’s industrial output entered positive territory and recorded a 0.1 per cent growth in January. The marginal improvement in the index of industrial production (IIP) was mainly on account of higher power generation and mining sector output, while manufacturing declined.
However, industrial output during the 10-month period from April to January of this financial year was flat compared with an over 1 per cent growth in the same period of 2012-13. “IIP data is in line with expectations. There is need for considerable pick up in February-March manufacturing activities,” Prime Minister’s Economic Advisory Council Chairman C Rangarajan said.
Expressing serious concerns over the industrial output remaining flat at 0.1 per cent in January, India Inc reiterated its demand for an interest rate cut by the Reserve Bank to kick-start investments, especially keeping in view the fall in retail inflation. “What is extremely worrisome is that the decline in investment and consumption demand is showing no signs of reversing,” CII Director General Chandrajit Banerjee said.
“The decline of CPI inflation should spur the RBI to give a predominance to growth and cut interest rates,” he added. Easing onion and potato prices pulled retail inflation in February to a 25-month low of 8.1 per cent. “Negative growth in manufacturing, though seems to be waning, remains a cause of concern. Depressed demand and investment conditions continue to plague the sector. With little room for any new policy measure to address the slowdown, we expect the sector to register a subdued growth in next few months,” Ficci President Sidharth Birla said.
“With the trend reflected in retail inflation and IIP data released today, we see no reason why the RBI should not bring the focus back on growth and cut interest rates in the forthcoming policy announcement,” he added. The RBI, which has maintained a hawkish interest rate regime to tame inflation, is scheduled to announce the next monetary policy on April 1.
“Since WPI inflation and CPI inflation are in the softening trend and subsiding month after month, RBI at this juncture should come forward to reduce the policy rates and help the industrial activity to recover at a faster pace,” PHD Chamber of Commerce President Sharad Jaipuria said. In January 2013, factory output measured in terms of IIP grew 2.5 per cent. The contraction in IIP in December was revised to 0.16 per cent from the provisional estimate of a 0.6 per cent dip. Factory output started to decline in October with the IIP contracting 1.6 per cent and continued till December, as per Central Statistics Office (CSO) data released on Thursday.