January IIP at 6.8%; cap goods down 1.5% YoY

Industrial output rose higher-than-expected in January at 6.8% buoyed by an increase in production of non durable goods even as the capital goods and mining sectors continued to decline.

The consumer non-durable goods sector saw a growth of 42.1% versus 5%, year-on-year. However, the capital goods space remained a sore point as the figure dropped to negative 1.5% compared to 5.3% growth same period last year.
According to Upasna Bhardwaj, economist, ING Vysya, the recovery is not broadbased. "Subdued capital goods output continues to increase the call for expediting measures to boost investment activity."
Analysts on average had expected a rise of 2.1%, a CNBC-TV18 poll showed. The January figure compares with December's provisional increase of 1.8%.
Manufacturing output, which constitutes about 76% of industrial production, rose 8.5% from a year earlier, the statistics office said.
During April-January, industrial production expanded 4.0%. Output grew 7.8% in the 2010-11 fiscal year that ended in March, below the 10.5% clocked the year before.
The mining sector of the economy grew at (-) 2.7% in January versus (-) 3.7% in December.
The BSE Sensex pared gains after stronger-than-expected industrial output reduced hopes for a rate cut, which some analysts had previously said could have come as early as this week's RBI policy meeting.
In a surprise move on Friday, the Reserve Bank of India (RBI) cut its cash reserve ratio by 75 bps, which is expected to release Rs 48,000 crore into the system.
Now, the central bank is certainly going to wait for the Budget and the government's borrowing programme for the next year and what is going to be the (fiscal) deficit number, says Ashok Gautam, senior vice president and global head of markets, Axis Bank. "That is why we believe the rate decision will happen in April."