The index for industrial output (IIP) for the month of October slipped to a three-year low of negative 4.2 percent against a CNBC-TV18 poll estimate of 2.1 percent, led by a degrowth in manufacturing sector, which stood at -7.6 percent as against 2.5 percent (month-on-month). The September IIP had come in at 2.5 percent.
The growth in intermediate goods contracted 3.1 percent in October against a growth of 1.8 percent teh month before and capital goods shrunk 2.3 percent against a growth of 11.6 percent. But the shocking declines came in the consumer durables (-35.2 percent vs -11.3 percent) and in the consumer goods (-18.6 percent vs -4 percent) segments. The contraction in consumer durables is baffling considering it was right in the middle of the festive season. Consumer non-durables too had little to cheer, contracting 4.3 percent vs a growth of 1.5 percent
The few bright spots were electricity (13.3 percent vst 3.9 percent), basic goods (5.8 percent vs 5.1 percent) and mining (5.2 percent vs o.7 percent)
Inflation based on consumer price index (CPI) further cooled to 4.3 percent in November as against 5.52 percent in October led by favourable base. A CNBC-TV18 poll of analysts had estimated it at 4.4 percent.
According to estimates, the biggest decline has been led by food, beverage and tobacco inflation, which constitute 50 percent of CPI. The food inflation fell to 3.1 percent against 5.59 percent on a month-on-month basis. The data for rural inflation came in at 4.09 percent against 5.52 percent and that for urban inflation stood at 4.69 percent versus 5.55 percent M-o-M.
Reacting to the numbers, Rupa Rege Nitsure, Chief Economist & GM, Bank of Baroda, said though the data for October is due for correction, it is true that industrial production is not looking very encouraging, nor has credit taken off. Hence, she does not expect any rate cut, “definitely not on account of lower food inflation because it is seasonal in nature”.
Sandip Sabharwal, independent market expert, says: “The IIP data has come in at a time when global market is very volatile. The slowdown is a reality, and corrective mood in the market will continue.”
He too feels the RBI communication is very clear – that the central bank will not cut rates till February. He expects market to sink a little more.
Soumya Kanti Ghosh, Chief Economic Advisor, SBI, said the IIP numbers are definitely shocking but he feels that in October there has been a 78 percent contraction in communication sub-sector.
“October was the month when Nokia had shutdown its operations in India. So, that could be an explanation for the decline by 78 percent and that could be one of the possible results for this shocking IIP number at -4.2 percent. We were expecting that the IIP numbers should increase this month but it has moderated particularly due to this one-off phenomenon,” he said.
However, he feels that if one takes out the radio, TV, communication segment, which has declined by 78 percent, IIP has actually expanded in positive category.
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