Sept IIPat 2%, Oct inflation rises to 10.09% BS Reporter | Mumbai November 12, 2013 Last Updated at 17:34 IST Sept IIP below expectations at 2%, Oct inflation rises to 10.09% Factory output disappoints while Inflation at 4 month high Contrary to bouyant expectations, the Index of Industrial production(IIP) for the month of September stood at 2%. While this is much better than 0.6% growth clocked in the month of August, the September growth comes lower than the month of July when the industrial output registered a growth of 2.7%.Factory output continued to dissapoint pulling down the overall growth. July IIP has also been revised downwards to 0.4% as compared to 0.6% as reported earlier. Higher industrial growth for the month of September was expected as the eight infrastructure sectors, also known as the core sectors, grew by a year-high of 8% in September against 3.7% in the previous month. The core sector roughly contributes 38% to the IIP and it was expected that there could be some impact felt in the overall industrial output. Meanwhile, retail inflation(CPI) for the month of October rose to 10.09% vs 9.84% in September. This is a 4 month high with food inflation rising to 12.56% vs 11.44% (MOM). IIP at 2%, CPI inflation at 10.09%: Experts still bullish on India story By ECONOMICTIMES.COM | 12 Nov, 2013, 06.23PM IST I think the growth rate of basic industry is good. On the whole we do expect the second half of the year to see a pick-up, says C Rangarajan. The industrial growth number for the month of September came in at a disappointing 2%, way below what the market was expecting. An ET Now poll had estimated it to grow at 3.6% versus 0.6% in August. Experts are however bullish on the India growth story. Core sector performance is a better indicator. It is coal, power, natural gas; all that gets reflected in the basic industry. I think the growth rate of basic industry is good. On the whole we do expect the second half of the year to see a pick-up, says C Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister. Heres the break-up of industry data: - Capital goods growth was at -6.8% in September versus -2% in August. - Manufacturing growth at 0.6% versus -0.1% the previous month. - Electricity growth at 12.9% versus 7.2%. - Basic goods growth 5.4% verus 1.5% - Mining growth 3.3% - Consumer durables growth at -10.8% versus -7.6% The government also released the CPI inflation data, which was at 10.09% as against 9.84% in the previous month. - Consumer food price inflation was at 12.56% versus 11.44% in September. - Urban inflation at 10.2% versus 9.93% - Rural inflation at 10.11% versus 9.71%. The CPI numbers indicate a sharp increase in food prices. One has to look at the non-food part of the CPI inflation, which may not be as high as food inflation. But anyway, this is a disturbing thing as food inflation, if it persists long enough gets generalised, says Rangarajan. Says K Harihar, Treasurer, FirstRand Bank: If you look at whats happenig in the bond market, people are already pricing in a repo rate hike. The worrying thing is that the corridor of 100 basis points will also mean that there is a high likelihood that the MSF rate will also go up 25 basis points. Not reacting to a high inflation number can actually be something that will keep the deposit growth rate anaemic. So, its a very tough balance. So, do you actually believe that it will actually curb credit growth, do you believe that itll curb GDP growth. I dont believe there is one-to-one elasticity. Therefore, the bond markets will probably heave a sigh of relief that the IIP numbers were also not powerful. Had they been good, the case for a rate hike or a series of rate hike would have got a bit tougher. Concerns over tightening measures may have gathered weight, thanks to the high inflation figure, but analysts believe that the GDP story is healthy. We are talking about the GDP number of 4.7% in this financial year and about 5.5-5.6 to be precise for the next one, says Siddhartha Sanyal, Barclays Bank, told ET Now earlier in the day. Eight per cent does not look far away. Exuding confidence about Indias potential, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the country will get back on the targeted growth trajectory of 8 per cent after two years. I think we can hit what we thought was our trajectory two years later because of the slowdown that we have, Ahluwalia told reporters at the 34th SKOCH Summit in New Delhi. Talking of the RBIs tightening stance, Indranil Pan, Chief Economist, Kotak Mahindra Bank, says: The way I would look at the Reserve Bank of India is that they would be probably looking at some sort of a weighted average between the WPI and the CPI when they take the policy decision; and because the WPI is rising but the CPI might be falling a little bit there might not be too much comfort on the weighted average perspective also. So, I would continue to hold my belief that another 25 bps tightening in the monetary policy is probably due on December 18 when the Reserve Bank meets once again. The domestic data so far has been on the good side. Trade deficit figure for the month of October, released yesterday, stood at $10.56 billion, as against $6.7 billion in the previous month. The number is about 50% seen in October 2013, and that was the highlighting point. The latest reading of the countrys services sector for October was higher than seen in the previous month. The HSBC Purchasing Managers Index (PMI) for services saw a reading of 47.1 points in October, fourth consecutive month of contraction, but higher than the four-and-a-half year low of 44.6 in September. A reading of 50 separates growth from contraction. Infrastructure output data, released late last month, for September, was robust. Output rose an annual 8%, accelerating from the previous months 3.7%. The core sector number had been quite decent ... On the other side, exports are doing relatively better, says Siddhartha Sanyal, Chief India Economist, Barclays Bank. The bogey of rising current account deficit has somewhat been taken care of, largely due to the projections made by brokerages and the government. The current account deficit is now seen at around $45 billion for the current financial year, against the previous estimate of $70 billion. The new figure is supported from Standard Chartered as well as the government. In fact it (the CAD situation) has already improved. The fiscal Q3 current account deficit number will be very close to balance, and could be a small surplus, says Robert Prior-Wandesforde, Head of ASEAN, India Economics, Credit Suisse.
Posted on: Wed, 13 Nov 2013 01:31:01 +0000