Weakness in IIP to continue for next 2-3 months: Experts

India’s factory output contracted 0.4 percent in December amid signs of faltering industrial activity because of demonetisation.Gaurav Kapur, Chief Economist, IndusInd Bank is not surprised at the negative IIP number for December because the high base combined with high frequency indicators like PMI or car sales all pointed towards subdued activity. Core sector numbers, which has a 38 percent weightage in IIP has shown 5.6 percent growth and that augers well for the economy going forward. Barring natural gas and crude oil all other sectors have shown positive growth, said KapurSimilarly, DK Joshi, Chief Economist, CRISIL is also not surprised at the negative number as demonetisation impact was harshest in December. The number indicates that industrial output is not picking up and does point towards a weak economy. Moreover, it seems to be one of the weakest years in the last 3-4 years, said Joshi. He expects the weakness to continue over the next 2-3 months.According to Joshi, this  IIP data is not so reliable since the base revision hasn’t taken place but the only good thing is it is a consistent date.When asked how the bond markets would react to the IIP number, Ashutosh Khajuria, ED, Federal Bank, said the only silver lining from this poor number for the bond market is that there is a case for softening of interest rates, but not sure that the Central Bank would oblige so soon.For the full coverage, watch video...