Factory output rises 5.9 percent; food prices fall (Roundup)

January 12th, 2012 - 8:52 pm ICT by IANS  

Pranab Mukherjee New Delhi, Jan 12 (IANS) Industrial output rose by 5.9 percent in November, beating estimates, against 4.74 percent contraction in the previous month, and food prices fell for the second straight week in the last week of December year-on-year, encouraging the government to say it would focus policies for sustained growth.

Raising hopes of an end to the economic slowdown, official data released Thursday showed the factory output, measured in terms of the Index of Industrial Production (IIP), registered a cumulative growth of 3.8 percent in the April-November period.

The manufacturing sector, which constitutes over three-fourths of the IIP index, rebounded with a 6.6 percent growth in November after a 6 percent contraction in the previous month.

“We need to build on this recovery with a stronger performance of capital goods, and therefore investments, to recover the growth momentum in the remaining months of the current financial year,” said Finance Minister Pranab Mukherjee, seeing the factory output and food inflation data.

“The policy focus will have to be accordingly adjusted,” he added.

Food inflation remained negative for the second consecutive week, indicating headline inflation could come down. Food inflation was recorded at 2.9 percent for the week ended Dec 31.

Mukherjee said the general price level would continue to moderate in the coming months and industrial output and overall economic growth was likely to rebound.

“We can expect to have better performance in the coming months. In the rest four months of the fiscal - December, January, February and March - we will have better performance,” he said.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said the rebound in factory output growth indicated an end to the economic slowdown and would help improve business sentiment.

“The industrial growth of almost 6 percent is a good change. It hopefully indicates that the slowdown in industry will basically come to an end during the third quarter,” said Ahluwalia.

According to data released by the ministry of statistics and programme implementation, electricity output grew 14.6 percent in the month under review as compared to 5.6 percent in the previous month.

However, the contraction continued in the mining sector. It contracted 4.4 percent in November 2011 as compared to the 7.2 percent in the previous month.

Another area of concern was capital goods which contracted by 4.6 percent in November.

Analysts said with improvement on both growth and inflation fronts, the Reserve Bank of India is unlikely to tinker with the key policy rates in its monetary policy review Jan 24.

Data released by the ministry of commerce and industry showed that the prices of vegetables were less than half during the week when compared to the prices in the corresponding week of last year.

Inflation in overall primary articles, which has a 20.12 percent weightage in the wholesale price index, rose to 0.51 percent in the week under review.

However, fuel and power inflation declined marginally to 14.45 percent as compared to 14.6 percent in the previous week.

Industry associations, however, said policy makers need to remain cautious as fundamental trends remained weak.

“Strong growth in consumer goods in November is also based on a very low base of last year,” said Harsh Mariwala, president of the Federation of Indian Chambers of Commerce and Industry (FICCI).

He said with easing inflationary pressure, the Reserve Bank of India (RBI) should cut rates.

“Now that the inflation is going down and industrial growth remains fragile, the RBI should reduce interest rates as soon as possible to revive investments,” said Mariwala.

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