IIP Takes U-Turn to Rise 2% in Feb, Kin­dles Turn­around Hopes

In­dus­trial pro­duc­tion re­verses 3-month con­trac­tion while de­cline in re­tail in­fla­tion in March raises hopes of a rate cut

The Economic Times - - Economy - Our Bu­reau

New Delhi: In­dia’s in­dus­trial pro­duc­tion growth bounced back into pos­i­tive zone in Fe­bru­ary, re­vers­ing three months of con­trac­tion and adding to the re­cent flow of pos­i­tive data that sug­gests an up­turn in the econ­omy.

The In­dex of In­dus­trial Pro­duc­tion (IIP) rose 2% in Fe­bru­ary from a year ago, com­pared with 1.5% de­cline in the pre­vi­ous month, data re­leased by the sta­tis­tics of­fice on Tues­day showed.

Over­all April-Fe­bru­ary in­dus­trial growth is pegged at 2.6%, com­pared with 2.8% for the cor­re­spond­ing pe­riod in the pre­vi­ous fis­cal.

Ex­perts said it was too early to call a re­bound. “In­dus­trial growth though pos­i­tive at 2% for Fe­bru­ary is still very low and does not re­veal any turn­around. Un­less such a trend is main­tained for three suc­ces­sive months, it will not be pos­si­ble to con­clude so,” CARE Rat­ings said in a state­ment.

The re­cent data flow has been pos­i­tive and of­fers some hope of a turn­around. The com­pos­ite man­u­fac­tur­ing and ser­vices Pur­chas­ing Man­agers’ In­dex (PMI) hit a 37-month high in March while mo­tor­cy­cle and com­mer­cial ve­hi­cles sales ac­cel­er­ated at a dou­ble-digit pace dur­ing the month.

The forecast of an above-nor­mal mon­soon this year should also boost sen­ti­ment and sup­port in­dus­trial pro­duc­tion growth.

“The IMD’s forecast of an above-nor­mal mon­soon has boosted the out­look for ru­ral de­mand, which should help ar­rest the sus­tained con­trac­tion in con­sumer non-durables over the com­ing months,” rat­ings agency ICRA said in a state­ment.

In­dian econ­omy is es­ti­mated to have grown 7.6% in 2015-16 and the Re­serve Bank of In­dia has forecast 7.6% growth for the cur­rent fis­cal as well. A good mon­soon com­bined with the up­turn in in­dus­trial ac­tiv­ity could push it up to­wards the 8% mark.

In­dus­trial growth got a boost from 9.6% in­crease in elec­tric­ity gen­er­a­tion and strong 5% in­crease in min­ing out­put. Man­u­fac­tur­ing, which makes up over 75% of the IIP, rose only 0.7%, drag­ging down the over­all growth.

Con­sumer goods’ pro­duc­tion in­creased 9.7% in Fe­bru­ary, val­i­dat­ing the strong ur­ban con­sump­tion sen­ti­ment. Con­sumer non-durables’ pro­duc­tion con­tracted 4.2%, again point­ing to the ru­ral stress be­cause of two years of poor mon­soon rains. Over­all, con­sumer goods’ pro­duc­tion rose 0.8%.

Pro­duc­tion of cap­i­tal goods, a proxy for in­vest­ments, de­clined 9.8% in Fe­bru­ary, sug­gest­ing no im­me­di­ate signs of an in­vest­ments re­cov­ery.

“IIP data re­lease shows a con­tin­ued con­trac­tion in cap­i­tal goods, an in­di­ca­tion of a per­sis­tent lack of in­vest­ment de­mand,” said In­dranil Pan, chief econ­o­mist at IDFC Bank.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.