The Mint report for 12 March 2012

The Mint report for 12 March 2012

The government has sounded a note of confidence through the President’s Speech on Monday. President Pratibha Patil told a joint session of Parliament the fundamentals of India’s economy remained strong. She said the country would return to a growth rate of 8-9% soon. Patil added that the government’s had a 9% growth target for the five-year planning period ending in 2017. The President’s speech also reiterated the government’s commitment to implementing the goods and services tax and vastly increasing exports.

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President’s speech projects a quick rebound in growth;industrial output recovers in January, but remains volatile; markets end Monday in the green

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But while the government may be confident about India’s growth, new data suggests a little caution may be needed. India’s industrial output has rebounded in January, but some key sectors show little or no growth. The index of industrial production for January stood at 6.8% year-on-year. The previous month it was at 2.5%.

The IIP has been criticized for its volatility, and economists weren’t rushing to cheer the apparent rebound. Indeed some key components of the index contracted. On the bright side, manufacturing grew at a respectable 8.5% during January. And consumer non-durables went up 42.1%. But mining dropped for the sixth month in a row, falling 2.7%. And crucially, capital goods showed a1.5% shrinkage. The IIP data comes just days before RBI’s monetary policy review on Thursday and the Union budget on Friday.

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