Factory output up 2.4% in January

After being on the downhill for past two months in a row, industrial output grew by 2.4% in January bringing hopes of slow but calibrated growth. Improvement of the sector will also mount pressure on the RBI to ease interest rates in its forthcoming monetary policy review slated for March 19.

While the sector performance is showing signs of recovery, the Finance Ministry and India Inc alike will impress upon the RBI to lower interest rates in its policy announcement.

The factory output as measured by the Index of Industrial Production (IIP) grew by 1% in January 2012. It had contracted by 0.8% in November and 0.5% in December.

Mounting pressure on the RBI to lower interest rate, secretary, Department of Economic Affairs, Arvind Mayaram while speaking to reporters said “Inflation numbers have also come down so there is certainly a case for giving further impulses for growth.”

Mayaram said,  “The central bank will take into account various developments and macro economic conditions before taking a view on interest rate at its mid-quarter review of Monetary Policy on March 19.”

Commenting on the IIP numbers, chief economist of ratings and consulting firm Crisil, D.K Joshi said, “Well I will be bit cautious. It is still not a trend. IIP numbers have been volatile. It is not likely that next month also exports will be inching up. But I would say it is positive.”

Meanwhile Industry chambers including CII and FICCI said that the apex bank should reduce policy rates by at least 50 basis points in its forthcoming policy review.

Commenting on IIP numbers, Naina Lal Kidwai, president, FICCI said “The growth in industrial and manufacturing sector remains an area of concern as positive growth of 2.4% in January 2013 comes over a low base. With fifty per cent of manufacturing sectors registering negative growth, any sustained growth remains elusive in the sector in immediate future”.

Meanwhile sectors that performed better in January include manufacturing sector  which constitutes over 75% of the index  grew by 2.7% in January.

Power generation increased by 6.4% compared to 3.2% growth in January 2012. During the April-January period electricity generation has gone up by 4.7% against 8.8% in the same period in the last fiscal.