Industry grows by 2.4%, but retail inflation tops 10%
India's industrial production grew by a mild 2.4% in January against a contraction of 0.5% in December - signalling a rebound, but hopes of an interest rate cut that could give it momentum were shaken as retail price inflation rose. HT reports.Mixed signals with a dash of optimismbusiness Updated: Mar 13, 2013 02:19 IST
India's industrial production, in which manufacturing industries play a vital role, grew by a mild 2.4% in January against a contraction of 0.5% in December - signalling a rebound, but hopes of an interest rate cut that could give it momentum were shaken as retail price inflation rose to 10.91% in February.
Experts said the green shoots of recovery remained elusive, making a strong case for an interest rate cut by the Reserve Bank of India (RBI) in its policy review next week.
Rebounding growth in manufacturing and power generation aided the rebound in the index of industrial production (IIP) in January, data for which was released on Tuesday.
"The growth in industrial and manufacturing sectors remain an area of concern as positive growth of 2.4% in January comes over a low base," said Naina Lal Kidwai, country head, HSBC India and president of industry chamber FICCI. Possible rate cuts by the RBI in its forthcoming monetary policy review on March 19 would help revive investments, she added.
CII president Adi Godrej also echoed the same sentiments.
"It is too early to assume that the slowdown has bottomed out and green shoots of recovery are around the corner, if we factor in the base effect, the performance of industry is still below potential," said Godrej
Manufacturing and electricity sectors grew 2.7% and 6.4% respectively in January against the year-ago period. Significantly, capital goods output was down 1.8% in January, against a contraction of 2.7% in the year-ago period.
"It remains to be seen whether the trend is sustained… there has been an improvement in capacity utilisation but recovery may be U-shaped going forward," said Soumya Kanti Ghosh, senior fellow, ICRIER. A U-shaped recovery signals a slower rebound compared with a quicker V-shaped one.
Industrial production during the April-January grew by an average of 1%, down from 3.4% last year.