July IIP at 3.3%: Experts decode the fall

The Index of Industrial Production (IIP) growth for the month of July, 2011 saw a sharp decline at 3.3% compared to 8.8% in the previous month.

In an interview to CNBC-TV18, TCA Anant, chief statistician of India and Shubhada Rao, chief economist at YES Bank discuss what this fall means for the economy going forward and the ramifications on the Reserve Bank of India's (RBI's) policy stance. Here is the edited transcript of their interview. Also watch the accompanying video. Q: What do you infer from this drop in capital goods and intermediate good numbers? How do you look at this from a trend perspective? Anant: Firstly, both have been markedly volatile numbers for a number of years, in the old as well as new series. This volatility is inherently based in the structure of the index and the manner in which these particular numbers are constructed.
When you are dealing with volatile numbers, it is difficult to make very short-medium projection on underlying trends from single numbers per se. It would be better to look at the trend, emerging by taking any set of numbers and reading back at least six-eight months if one can discern underlying patterns.
If you were to do that without getting into specific months