IIP data dampens recovery process

Industrial production contracted by 0.6% in December as compared to 2.7% in the same period in 2011. The decline in the Index of Industrial Production (IIP) was maily due to disappointing performance of manufacturing and mining sectors as well as fall in production of capital and consumer goods.

The limping industrial growth once again brought to the fore the Central Statistical Organisation’s (CSO) forecast of 5% growth in the current fiscal.

Industrial production growth was a meagre 0.7% in the April-December period of the current financial year, a steep fall from 3.7%  in the same period of 2011-12, the CSO data said.

Meanwhile, IIP data for November has been revised further downwards to 0.84%  from a contraction of 0.1 per cent during the period as per provisional estimates released last month.

What is extremely worrisome is the negative growth of the manufacturing sector driven by a sharp decline in demand conditions in the economy.

The manufacturing sector, which constitutes over 75 per cent of the index, registered a contraction of 0.7 per cent in December 2012, as against a growth of 2.8 per cent during the same month of 2011.

Mining output in December fell by 4% compared to a decline of 3.3% in 2011.

In April-December, the production in the sector declined by 1.9 per cent, against a contraction of 2.6 per cent in the year-ago period.

Expressing concern over the IIP figures, India Inc has urged Prime Minister Manmohan Singh to monitor the progress for the next few months.

“This has happened especially at a time when the festive season was expected to boost consumption demand. The data indicates that upstream mining industries continue to show a contraction in output which, going forward, would lead to shortages of coal, ores and other industrial raw materials,” Chandrajit Banerjee, Director General, CII said.

“These disappointing figures certainly call for high level committee under the Prime Minister to look into the issue of industrial slowdown and monitor its progress for the next few months,” Naina Lal Kidwai, FICCI President said.

Retail inflation stays in double digits at 10.79%

Meanwhile, retail inflation rose to 10.79 per cent in January primarily due to high vegetable prices. Consumer Price Index (CPI) was 10.56 per cent in December.

Vegetable prices surged by 26.11 per cent while the cost of oils and fats and cereals and cereal products stood at 14.98 per cent and 14.9 per cent respectively.

Prices of food and beverages rose by 13.36 per cent while prices in fuel and light and clothing, bedding, footwear segments increased by 8.51 per cent and 11 per cent respectively.

The Wholesale Price Index (WPI)-based inflation data is likely to be announced on Thursday.