Focus shifts to RBI as green shoots wilt

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New Delhi | Updated: December 13, 2014 1:25:52 AM

Industrial production unexpectedly dropped to a three-year trough...

The retail inflation eased to a fresh low of 4.38% last month, building an irresistible case for the RBI to effect the much-anticipated monetary policy shift in its next bi-monthly review on February 3. (Reuters)The retail inflation eased to a fresh low of 4.38% last month, building an irresistible case for the RBI to effect the much-anticipated monetary policy shift in its next bi-monthly review on February 3. (Reuters)

Industrial production unexpectedly dropped to a three-year trough of 4.2% in October, the first contraction this fiscal, offering a reality check of the state of the economy since the Narendra Modi-led NDA stormed to power. Private consumption, for long a laggard, plummeted further and manufacturing growth hit a three-year low of -7.6% in October, while retail inflation eased to a fresh low of 4.38% last month, building an irresistible case for the RBI to effect the much-anticipated monetary policy shift in its next bi-monthly review on February 3, if not earlier.

The government, however, revised the September growth in the index of industrial production (IIP) to 2.8% against 2.5% announced earlier.

Importantly, “radio, TV and communications equipment and apparatus” — which has been witnessing negative growth this fiscal, especially after the disruption of Nokia’s operations in Tamil Nadu — contracted 70.2% in October due to complete stoppage of production at the plant.

rbi-graph

Exclusive of this segment, the overall industrial production would have shrunk by just 0.2%. Yet, given that consumer durables contracted 35.2% in October and capital goods output shrank 2.3%, the economy is clearly yet to turn the corner.

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