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Wednesday, December 11, 2019

India’s Feb industrial output slows to 0.6%: Govt

Analysts polled had expected output to shrink 0.7 percent annually.

Written by PTI | New Delhi | Published: April 12, 2013 11:22:19 am

Showing slump in the economy,the industrial growth has slipped to 0.6 per cent in February this year mainly on account of contraction in power generation and mining output and poor performance of manufacturing sector.

Factory output,as measured by the Index of Industrial Production (IIP),had grown by 4.3 per cent in February last year.

For the April-February period of 2012-13 fiscal,the industrial production growth is at 0.9 per cent,down from 3.5 per cent in the same period of 2011-12,according to official data released here today.

Meanwhile,the decline in industrial output for January has been remained almost at a same level of provisional estimates of 2.4 per cent released last month.

The manufacturing sector,which constitutes over 75 per cent of the index,grew by meagre 2.2 per cent in February,as against 4.1 per cent in the same month of 2012.

The growth in the output of the key sector remained low at one per cent in April-February this fiscal,as against 3.7 per cent growth in the same period of 2011-12.

There was a contraction of 3.2 per cent in power output in February this year compared to a growth of 8 per cent in the same month of 2012.

During the April-February period,electricity generation has gone up by 4 per cent,compared to a growth of 8.7 per cent in the same period of the 2011-12 fiscal.

The mining output in February this year too contracted by 8.1 per cent,compared to a growth in production by 2.3 per cent in the same month of 2012.

For the April-February period,the production in the sector showed a decline of 2.5 per cent,against contraction of 2.1 per cent in the year-ago period.

Overall,13 of the 22 industry groups in manufacturing sector have shown positive growth during February.

Capital goods output grew by 9.5 per cent in February,as against a growth of 10.5 per cent in same month of 2012.

Capital goods output contracted in the April-February period by 7.6 per cent,as against a dip of 1.8 per cent in the same period of 2011-12.

The consumer goods output saw meagre growth of 0.5 per cent in February,compared to a decline in production by 0.4 per cent in same month last year.

In the April-February period of the last fiscal,the growth in the segment was 2.5 per cent as compared to 4.7 per cent in the same period of 2011-12.

The dip in the output of consumer durables stood at 2.7 per cent in February,as compared to a contraction of 6.2 per cent in the same month of 2012.

The growth in the output of these goods remained flat at 2.7 per cent in April-February period of last fiscal.

The consumer non-durables output grew by 2.9 per cent in February,compared to 4.4 per cent in the same month last year. This segment’s growth was at 2.3 per cent in the

11-month period of last fiscal,as against 6.4 per cent in the previous fiscal.

The intermediate goods production also saw a dip of 0.7 per cent in February,compared to a growth of one per cent in the same month last year.

During the April-February period,this segment recorded a growth of 1.5 per cent,compared to a contraction of 0.7 per cent in the first 11 months of 2011-12.

The basic goods output saw a contraction of 1.8 per cent in February compared to a growth of 7.6 per cent in the same month last year.

During April-February period of 2012-13,the production of basic goods grew by 2.3 per cent compared to a growth of 5.9 per cent in the 11 month period of previous fiscal.

Industrial growth slips to 0.6% in Feb

(Reuters) India’s industrial output barely grew in February and retail inflation slowed slightly for the first time in six months in March,but double-digit price rises still pose a challenge for policymakers seeking faster growth without runaway inflation.

Production at factories,mines and utilities grew 0.9 percent from a year earlier,better than the 0.7 percent contraction forecast by analysts but not enough to convince economists that Asia’s third-largest economy has bottomed out.

The weak number keeps the pressure on the central bank to cut interests rates,but economists said the slight drop in consumer price inflation to 10.39 percent in March was unlikely by itself to convince the bank. The previous month annual retail price inflation was 10.91 percent.

“More focus will be on the wholesale price data,which is out next Monday. We need to see this series easing further to raise hopes of further RBI cuts,” Jonathan Cavenagh,a foreign exchange strategist with Westpac in Singapore.

India’s 10-year benchmark bond yield fell 4 basis points to 7.86 percent from levels before the data as investors bet slowing consumer inflation would provide room for the central bank to cut interest rates next month.

The rupee strengthened to 54.41/42 from around 54.45/46 before the data,although the benchmark BSE share index was largely unaffected,remaining down over 1 percent on the day.

Plagued by a combination of weak corporate investment and flagging consumer demand,the Indian economy is struggling to recover after growing at its slowest rate in a decade in the fiscal year that ended in March.

GDP growth hit a near four-year low of 4.5 percent in the quarter to end-December,a new low for an economy also battling stubborn inflation and a record current account deficit.

INSTANT VIEW

COMMENTARY

RAHUL BAJORIA,REGIONAL ECONOMIST,BARCLAYS CAPITAL,SINGAPORE

“The consumer price index (CPI) is more encouraging than the industrial output. The drop in food prices surprised us on the downside and also it bodes well with the expected WPI (wholesale price index) print which is estimated to be low 6.5 percent on Monday.

“Inflation problems seem to resolving on the margin,while the industrial productivity number is still weak. I think we can’t conclusively say that growth has bottomed out. We expect RBI to sound dovish and signal more rate cuts taking comfort from easing inflation. We expect RBI to cut the repo rate by another 50 basis points in the next two meetings.”

SUJAN HAJRA,CHIEF ECONOMIST,ANAND RATHI,MUMBAI

“The unexpected positive surprise on the IIP is due to capital goods which is known to be notoriously volatile. It does not necessarily give a new trend,but we can say manufacturing sector growth has bottomed out.

“The RBI can take comfort from the fact that food inflation is moving towards single digit. It will give elbow room to the RBI to lower rates on May 3.”

A PRASANNA,ECONOMIST,ICICI SECURITIES PRIMARY DEALERSHIP LTD,MUMBAI

“The big increase in capital goods output contributed to the positive IIP number,but I wouldn’t say the corner has turned as there is no anecdotal evidence of new projects coming up. The CPI looks to be moving in the right direction,food prices seems to have slowed,though the CPI level is still elevated.

“I expect the central bank to cut the repo rate by 25 basis points in May as the wholesale price index is expected to moderate and as long as RBI is comfortable with this trajectory,it is better to cut rate earlier than later to boost growth.”

DHARMAKIRTI JOSHI,CHIEF ECONOMIST,CRISIL LTD,IN MUMBAI

“The sluggishness has continued. Going into 2013/14,it should pick up from this level and particularly there are better prospects for consumption-led sectors,rather than investment-led. But there again there may not be buoyancy but relative improvement.

“We are factoring in a 25 basis points rate cut in May even though there is not much room for easing. It is difficult,however,to say at this stage whether the May rate cut would be the last.

“On inflation our sense is that it may come down this year,but not to the level where the RBI is comfortable with it.”

ABHEEK BARUA,CHIEF ECONOMIST,HDFC BANK,NEW DELHI

“On the IIP,it’s more of a play on capital goods and I can’t see a significant reason for that to improve. Definitely there seems to be bunching up in production,and this could be a data-related issue,which we have also seen in the past.

“We are perhaps consolidating at a very low level for the IIP,and there is no indication for recovery.

“Case for monetary easing has other considerations like the high current account deficit,and the high and stubborn CPI. At this stage,however,the case for a rate cut is 60:40. Core inflation is going to be on a comfortable trajectory and that should give some headroom for the RBI to cut rates in May and even perhaps inject liquidity through a CRR cut. Or maybe just cut repo rate but there is a case for some degree of monetary easing.”

JONATHAN CAVENAGH,FX STRATEGIST,WESTPAC,SINGAPORE

“Detail looks pretty solid as well from a capital goods and manufacturing perspective. CPI data was also released and remains above 10 percent,although it came in weaker than expected (at 10.4 percent versus 10.7 percent expected).

“More focus will be on the wholesale price data,which is out next Monday. We need to see this series easing further to raise hopes of further RBI cuts.”

ANJALI VERMA,ECONOMIST AT PHILLIPCAPITAL,MUMBAI

“I don’t think the numbers are anything to feel very happy about. IIP is still showing a fairly small amount of growth. The growth is still sluggish and there is no substantial improvement in industrial activity except for the base effect. CPI is only showing a marginal improvement.

“I have lowered my FY14 GDP forecast to 5.5 percent from 6.3 percent. I expect a 25 basis point cut in the repo rate on May 3.”

RUPA REGE NITSURE,CHIEF ECONOMIST,BANK OF BARODA,MUMBAI

“The data clearly shows that weaknesses continue in industrial production. Food articles inflation as expected is sticky but given the disproportionate increase in risks to growth I think the Reserve Bank of India will continue with its baby step approach and cut rates by 25 bps at its upcoming annual policy on May 3.”

MARKET REACTION

The 10-year benchmark bond yield fell after March consumer inflation slowed from February,raising expectations the central bank will have room to cut interest rates next month. The yield shed 2 basis points to 7.88 percent from levels before the data.

Other markets were rangebound from beforehand. The rupee was trading at 54.45/46 per dollar,while the benchmark BSE index was down 1.1 percent.

BACKGROUND

– India’s economic growth will remain subdued at 6 percent in 2013/14 and any recovery will be gradual,a Reuters poll of economists showed. Headline inflation is expected to average around 6.5 percent this year,above the Reserve Bank of India’s perceived comfort level of around 5 percent,reducing the chances of aggressive policy action to pull the economy out of its slowest pace of expansion in a decade.

– Prime Minister Manmohan Singh urged business leaders last week to keep faith in his Congress-led government’s efforts to improve a dire investment climate,without giving details of fresh steps to bring about a recovery in the sagging economy.

– Growth in India’s services sector eased in March to its slowest since October 2011 as order books filled at a slower pace,a business survey showed,compounding problems for the economy after earlier data showed manufacturing activity was also losing momentum.

– India’s annual car sales fell for the first time in a decade in the financial year just ended and are expected to post subdued growth this year,calling into question bullish expectations that fuelled billion-dollar bets from global manufacturers.

– Heavy imports of oil and gold,together with muted exports,drove India’s current account deficit to a record high in the December quarter,soaring to $32.63 billion or 6.7 percent of GDP.

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