Slump is probably over, IIP likely to have edged up in Dec
IIP contracts: High inflation destroying demand, say experts

Economy Feb 12, 2013

No green shoots yet: Dec IIP declines, pressure likely on RBI

By Firstbiz Staff

The country's factory output in December declined further against expectations of a rise as weak global economic situation did not offer a relief to the falling export demand.

The weak data is likely to pile up more pressure on the Reserve Bank of India to cut its policy rate by a further 0.25 basis points, in its next policy review on 19 March.

Factory output has been hurt by relatively weak global trade, especially from Europe, India's largest trade partner, with the debt-ravaged euro zone economy expected to contract again this year.

Factory output has been hurt by relatively weak global trade, especially from Europe, India's largest trade partner, with the debt-ravaged euro zone economy expected to contract again this year.

A Reuters poll of 24 economists had projected the index for industrial production (IIP) at 1.1 percent. In November, the output had shrunk 0.1 percent.

The manufacturing sector output declined 0.7%, capital goods output 0.9 percent and mining sector 0.4 percent and the electricity sector grew 5.2 percent.

Consumer non-durable output declined 1.4 percent and consumer durables 8.2 percent. Intermediate goods grew a marginal 0.1 percent.

The government also revised sharply downwards the November print to (-)0.8 percent from (-)0.1 percent earlier.

Even exports, which account for one-fifth of India's gross domestic product, fell for eight consecutive months up to November.

Meanwhile, ahead of the January inflation readings Reserve Bank Governor D Subbarao had said the price rise index which slowed to a three-year low of 7.18 per cent in December, is "still high."

In its own bid to revive the flagging economy, the Reserve Bank of India cut the key repo rate for the first time in nine months, by 25 basis points to 7.75 percent in January, but warned there was limited room for further easing.

With inputs from Reuters

by Firstbiz Staff

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