Indian economy performs better than forecast before elections as production rises, inflation cools

Mar 12 2014, 22:32 IST
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The fall in December's output was revised to 0.17 percent on year from 0.6 percent earlier. Reuters The fall in December's output was revised to 0.17 percent on year from 0.6 percent earlier. Reuters
SummaryIndia's flagging economy delivered rare good news with a slight expansion.

that escalating interest costs are impeding investment revival," CII Director General Chandrajit Banerjee said.

According to Index of Industrial Production (IIP) data, the marginal improvement in factory output was mainly on account of higher power generation and mining sector output, while manufacturing declined.

Prime Minister's Economic Advisory Council Chairman C Rangarajan said, "IIP data is in line with expectations. There is need for considerable pick up in February-March manufacturing activities."

During the 10-month period from April to January of this financial year, industrial output was flat compared with an over 1 per cent growth in the same period of 2012-13. In January 2013, factory output 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.

PHD Chamber of Commerce and Industry President Sharad Jaipuria said, "Since WPI (wholesale price) 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."

According to the data, factory output started to decline in October with the IIP contracting 1.6 per cent and continued till December.

Power generation posted a growth of 6.5 per cent in January, compared with 6.4 per cent in the same month of 2013. Expansion in power generation was 5.7 per cent in April-January from 4.7 per cent a year ago.

The mining sector, with a weight of about 14 per cent in IIP, grew 0.7 per cent in January as against a dip of 1.8 per cent in the same month in 2013. During April-January, mining output shrank 1.5 per cent as against a dip of 1.8 per cent a year earlier.

The manufacturing sector, which constitutes over 75 per cent of the index, declined 0.7 per cent in January as against growth of 2.7 per cent in the year-ago period. During April-January, the sector's output contracted 0.4 per cent compared with 0.8 per cent growth in the period last fiscal.

Overall, 11 of the 22 industry groups in manufacturing showed positive growth in January.

Consumer goods output declined 0.6 per cent compared with growth of 2.5 per cent a year earlier. During April-January, consumer goods output contracted 2.7 per cent, compared with 2.7 per cent growth in the corresponding period of 2012-13.

The consumer durables segment

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