Nov IIP rebounds led by manufacturing, rises to 5.9%

India’s industrial output rose 5.9 percent in November from a year earlier, government data showed, rebounding from an annual contraction of 5.1 percent a month earlier.

The improvement has mainly come in from manufacturing, consumer durables and consumer non-durables, while capital goods and mining index remain laggards.

Manufacturing output, which constitutes about 76 percent of the industrial production, grew an annual 6.6 percent, the federal statistics office said on Thursday.

[caption id=“attachment_179648” align=“alignleft” width=“380” caption=“Meanwhile, C Rangarajan said that the October IIP number was an aberration and that he expects IIP to pick up going forward. Reuters”]  [/caption]

During April-November, industrial production expanded 3.8 percent. Output grew 7.8 percent in the 2010/11 fiscal year that ended in March, slower than 10.5 percent clocked in the year before.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

Meanwhile, C Rangarajan said that the October IIP number was an aberration and that he expects IIP to pick up going forward. He added that the extent of decline in inflation will be important and that the FY12 growth will be 7 percent and above. “It largely depends upon the decline in inflation we will see in the December numbers,” C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council told CNBC-TV18.

A Prasanna, economist at ICICI Securities, Mumbai said : “The worry and alarm after October should tone down. There are data issues in IIP, and that is leading to volatility, but the genuine problems in supply sector are getting resolved, particularly in coal, and auto.

He reiterated Rangarajan’s view that going forward one will see improved data despite a slowdown. " I still think a 50-basis-point cut in banks’ cash reserve ratio is likely in RBI’s January 24 policy review.”

Reacting to the positive data, BSE Sensex briefly turned positive after the data from down 0.4 percent beforehand. The benchmark 10-year 8.79 percent, 2021 bond yield rose 3 basis points but later trimmed the rise to 2 basis points at 8.25 percent as the market had already begun pricing in no change in interest rates.

The benchmark five-year swap rate and the one year swap rates were up 6 basis points and 3 basis points. The partially convertible rupee was unmoved at 50.79/80 per dollar.

BACKGROUND:

Infrastructure sector output, which contributes nearly 38 percent to industrial production, grew 6.8 percent in November from a year earlier.

After falling for four months, car sales rose for a second month in December, climbing 8.5 percent from the same month a year earlier.

Manufacturing activity surged to a six-month high in December thanks to a spike in factory output and new orders from domestic and international firms, a survey of purchasing managers showed last week.

Inflation eased to 9.11 percent in November but has stayed above 9 percent for a year.

The Reserve Bank of India chief said in a BBC interview this month it is likely to begin easing monetary policy to address concerns about economic growth though it is not known when it will take place and “in what shape it will roll out”.

In December, the RBI paused its aggressive tightening cycle that involved lifting rates 13 times since March 2010 as the Indian economy tussles with a worrying combination of weak growth and high inflation.

Agencies