Industrial growth for December 2012: CARE Ratings
CARE Ratings has come out with its report on "IIP growth for December 2012". According to the rating agency, the growth of 6.8% in community, social and personal services seems difficult to attain with an expectation of reduced government spending in the coming months.
February 12, 2013 / 17:42 IST
CARE Ratings has come out with its report on "IIP growth for December 2012". According to the rating agency, the growth of 6.8% in community, social and personal services seems difficult to attain with an expectation of reduced government spending in the coming months.
The Central Statistics Office (CSO) has released the data for industrial production for the month of December 2012. Continuing with the decline in industrial production, IIP for the month of December 2012 registered a growth of -0.6% compared with 2.7% for the same period last fiscal. The negative growth has been primarily influenced by contraction in mining and manufacturing activities. This is the sixth month in the year where growth has slipped into negative territory.Cumulative growth in FY13 in Apr- Dec 2012 stands at 0.7% as against a growth of 3.7% in corresponding period of the previous year.
Cumulative Picture: (Apr- Dec FY13 over Apr- Dec FY12)Mining registered -1.9% growth in April – Dec 2012, as against -2.6% during the same period last yearManufacturing registered near zero growth of 0.7% in April - Dec 2012, when compared with 4.0% in April - Dec 2011.Relatively high growth rates witnessed in case of radio, TV etc, coke, refined petroleum, textiles and luggage etc.Growth in electricity has moderated to 4.6% in April – Dec 2012, as against 9.6% in same period last year.Policy Action
Last month, the Reserve Bank of India (RBI) cut policy rates by 25 basis points for the first time in nine months to boost growth as inflation showed signs of moderation. The RBI’s monetary policy is primarily influenced by the inflation numbers. The January CPI number came in at 10.79%, indicating high retail inflation. There is an expectation of another 25 bps cut in repo rates, however the RBI’s March policy action would be dependent on the FY14 budget which is to be presented on 28th February 2013.Conclusion
Belying expectations that the factory output cycle had turned; index of industrial production (IIP) for the month of December came in at -0.6%, below CARE’s own estimates of 2.17%. The Central Statistics Office (CSO) last week projected economic growth would decelerate to a decade’s low at 5% in 2012-13 beating expectations on the downside. Official sources are still hopeful of 5.5% or more during the year, hoping for a turnaround. We however feel that the CSO estimate of 5% seems more likely to be achieved with a downward bias. The growth of 6.8% in community, social and personal services seems difficult to attain with an expectation of reduced government spending in the coming months.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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