Jan IIP growth at 16.7% vs 1% (YoY); RBI action inevitable

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Annual industrial output growth eased in January, in line with market forecasts, and analysts said it could further weaken with the withdrawal of stimulus measures and an expected rate hike.

Finance Minister Pranab Mukherjee raised factory gate taxes in Budget 2010-11, the beginning of the unwinding of measures taken to shore up domestic demand and protect growth in the wake of the financial crisis and the economic slowdown.

Industrial output (IIP) for the month of January grew 16.7% as against 1% in January 2009. While the manufacturing sector grew to 17.9% versus 1% on year-on-year basis, growth of the mining sector was recorded at 14.6% as against 0.7% in the corresponding month of 2009. The electricity sector too grew at 5.6% in January 2010 versus 1.8% a year ago.

While January basic goods rose 10.7% as against -0.7% in January 2009, what came in as a surprise was the growth in capital goods, which was up 56.2% versus 15.9% (YoY). Intermediate good for the month too were up 21.3% as against 3.6% in January 2009. January 2009 consumer goods index grew 4.2% versus 3.6% (YoY).

Consumer durable goods grew at 31.6% as against 2.1% in corresponding month last year. Growth of consumer non-durables came in -3.1% versus 4% last year.

Speaking on the IIP numbers, Mukherjee said that while the high IIP growth indicated fast recovery in manufacturing, we would have to wait for one more month's IIP data for clear signals, "Two straight months of high IIP growth are encouraging," he said.

The December IIP data revised upwards upwards to 17.6% from 16.8%.

The country is seen growing over 7.2% in the year to March 2010, accelerating to 8.5% the year after and to 9% in 2011-12.

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