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March IIP eases from nine months high; grows at dismal 2.1%

13 May 2015 Evaluate

Slowing from nine months high level, the index for industrial output (IIP) for the month of March came in at 2.1%, lower than street expectation of a number of around 2.80% and also lower compared to 5% in February. The cumulative growth for the period April-March 2014-15 over the corresponding period of the previous year stood at 2.8%. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of March 2015 stand at 148.5, 209.3 and 176.4 respectively, with the corresponding growth rates of 0.9%, 2.2% and 2.0% as compared to March 2014. The indices for Mining, Manufacturing and Electricity sectors for the month of February 2015 at 2.5%, 5.2% and 5.9%. The cumulative growth in the three sectors during April-March 2014-15 over the corresponding period of 2013-14 has been 1.4%, 2.3% and 8.4% respectively.

As per Use-based classification, the growth rates in March 2015 over March 2014 were 2.3% in Basic goods, 7.6% in Capital goods and 1.9% in Intermediate goods.  The Consumer durables and Consumer non-durables have recorded growth of (-) 4.7% and 1.9% respectively, with the overall growth in Consumer goods being -0.7% v/s 5.2% in the previous month.

This data showed that the secondary sector continues to remain sluggish in volume terms, even overall economic growth is estimated at 7.4% in 2014-15 against 6.9% in 2013-14. Overall economic growth slowed to 5.1% in 2011-12 and further builds pressure on RBI to reduce its key policy rates in its upcoming monetary policy review, which is on June 2. The Reserve Bank of India has cut interest rates twice this year at unscheduled meetings, but kept its key repo rate on hold at 7.50% last meet, waiting to assess inflationary pressures and give commercial banks more time to cut their lending rates.

The government plans to release industrial output data based on a new methodology and use a different base year for calculating the index in the next few months. The industrial output data with “2004/05” as base year has become less relevant now after the government changed the methodology as well as the base year for GDP calculations in February. The revised base year for GDP is “2011/12”.

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