Feb IIP at 4.1%; FM hints at monetary policy easing

* Sluggish growth due to contraction in consumer durables,intermediate goods; Factory output clocked 6.7% in Feb 2011

Written by ENS Economic Bureau | New Delhi | Published: April 13, 2012 1:37:29 am

Factory output — measured by the Index of Industrial Production (IIP) — continued to be sluggish,growing by just 4.1 per cent in February on account of contraction in segments such as consumer durables and intermediate goods,a move that could prompt the Reserve Bank of India to cut interest rates in its annual policy review next week.

The IIP,which gauges factory output across the country,had clocked a 6.7 per cent growth in February 2011.

Terming the industrial growth “disappointing”,Finance Minister Pranab Mukherjee said,“These (IIP) figures will have bearing on monetary policy announcement scheduled for next week.” He said the anticipated revival in the manufacturing sector during the last quarter of 2011-12 has not materialised and “ uncertainty in the global economy coupled with monetary tightening in the past have impacted investment recovery”.

According to the IIP data,the growth in factory output during April-February 2011-12 stood at 3.5 per cent from 8.1 per cent from a year ago. While consumer durables registered a decline of 6.7 per cent in February,consumer goods contracted by 0.2 per cent during the month. Similarly,intermediate goods also saw a contraction of 0.6 per cent. The manufacturing sector,which constitutes more than 70 per cent of the index,grew by 4 per cent as against 7.5 per cent during the same period a year ago. Electricity generation showed a robust growth of 8 per cent as against 6.8 per cent during the year-ago period. Mining grew by 2.1 per cent.

Data woes: Jan IIP revised from 6.8% to 1.1%

With gaffes in data collection becoming a recurrent feature,the government now plans to set up a committee to tighten sources of data gathering. This comes on a day when the Ministry of Statistics and Programme Implementation admitted that during the compilation of IIP for January,2012,the sugar production was wrongly taken as 134.08 lakh tonnes in place of actual figure of 58.09 lakh tonnes. The discovery of the error has forced a sharp downward revision in January’s growth rate from 6.8 per cent to just 1.1 per cent.

In December,2011,the Commerce Ministry had admitted that exports were overstated by a whopping $9 billion during April-October 2011-12 on account of a “system crash” in the ministry and “mistakes in data classification and data entry”. Frequent and drastic revisions,say experts,only serves to undermine the credibility of India’s economic statistics that many have come to disregard.

ENS

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