India’s industrial output grew 2.7% in January from close to 0% in December, government data showed on Thursday, as cash ban dampened consumer demand and slowed economic output.
The slower growth in the index of industrial production keeps hopes afloat of a RBI rate cut in coming months even though the central bank will attach greater importance to the consumer price inflation.
During April-January, the IIP was up just 0.6% as against 2.7% a year ago.
The government’s decision to scrap old Rs 500 and Rs 1,000 notes to curb black money, graft and corruption has crimped demand severely in the world’s second populous country and one of the fastest growing economies.
While manufacturing output grew 2.3% in December, electricity was up 3.9% and mining 5.3%.
The capital goods output was up 10.7% as against 21.6% fall in the same month last year.
Consumer goods output was down 1% with durables growing 2.9% and non-durables falling 3.2%.
CSO has projected economic growth is projected at 7.1% for 2016-17 as compared with 7.9% in 2015-16, on expectation of a fall out of demonetisation on the country during the second half.
Concerns over economic growth has been increasing after Prime Minister Narendra Modi unleashed the bold move to scrap Rs 500 and Rs 1,000 notes from November 9, followed by tardy implementation and increasing hardship of cash-starved Indians.
In his February monetary policy review, the RBI paused on rates as it expects inflation to firm up due to the rapid pace of remonetisation.
Since 2015, RBI has lower rates by 175 bps while the government has stepped up spending and speeded up reforms to pump prime the economy amid feeble global recovery.