New Delhi: The index of industrial production growth rate for December slowed to 1.6% from 18% during the same month a year ago, government data showed on Friday.
However, the Central Statistics Office which releases the data revised IIP growth for November upward to 3.6% from 2.7% estimated earlier.
Manufacturing sector, which contributes 79% to the IIP grew at 1% in December compared to 19.6% in the same month a year ago. Mining and electricity sectors grew at 3.8% and 6% respectively during the month.
Showing its trademark volatility, the capital goods sector contracted by 13.7% compared to 42.9% growth a year ago. Consumer non-durables also contracted by 1.1% compared to a growth of 3% a year ago.
In terms of industries, 12 out of the seventeen 17 industry groups showed positive growth during the month.
Planning Commission deputy chairman Montek Singh Ahluwalia told reporters on the sidelines of an Indo-US Economic summit that high frequency IIP data is not necessarily an indication of an underlying trend. “Month-to-month variation in IIP should not occupy us too much,” he said.
Asked about the impact of a slowdown in industrial growth on economic expansion this fiscal, he said, “In order to achieve 8.5% GDP growth, 8% industrial growth for the whole year (2010-11) is enough.”
“In the current year, the Planning Commission has said that GDP will grow at 8.5% or may be a little higher. That prediction remains,” Ahluwalia added.
Jay Shankar, chief economist at the Religare Capital Markets Ltd said IIP has bottomed out in December.
“We continue to believe that the way forward is an uphill task, with investment growing at a slower pace than we had anticipated. Our analysis also shows that there is a good amount of complimentarity between capital goods in IIP and imports at the aggregate level, and a slowdown in both confirms our view,” he added.
Reacting to the slow IIP Gaurav Kapur senior economist, Royal Bank of Scotland, Mumbai said, “High statistical base effect was expected to pull down the headline number sharply and hence a growth rate lower than 2% is not surprising. On a month-on-month the IIP went up by over 11%, indicating strong momentum.
“Elevated base - December 2009 growth was an impressive 18.0% year-on-year -- has pushed the print to 1.6% overshadowing strong export performance and improvement in infrastructure sector. However, it should not be interpreted as a collapse in industrial activity a la 2008. Elevated base is expected to weigh on the IP releases going further too,” said Anubhuti Sahay, economist Standard Chartered Bank, Mumbai.
After the figures were out the partially convertible rupee trimmed its fall to be at Rs 45.73 per dollar from Rs 45.75 before the data.
The main share index BSE Sensex trimmed losses to be down just 0.1%. It had been down around 0.5% beforehand.
Reuters and PTI also contributed to this story