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  3. IIP growth is a bit disappointing and it may affect the GDP of second quarter: FM

IIP growth is a bit disappointing and it may affect the GDP of second quarter: FM

13 Oct 2011 Evaluate
The slowdown in the industrial production has raised the concern of the government. The Finance Minister Pranab Mukherjee accepted that the IIP slowdown may affect the Gross Domestic Production (GDP) growth in the second quarter.

The Index of Industrial Production (IIP) for month of August grew by 4.1% compare to 3.8% in July and for the first five months of current financial year cumulative growth of IIP was 5.6% compare to 8.7% in April to August 2010.

Reacting to the IIP data, Finance Minister said it may impact India's July-September quarter GDP. "It (IIP) is not encouraging. It is a bit disappointing and it may affect the GDP of second quarter."

However, finance minister did not give comment on the extent to which the subdued IIP numbers will impact on the GDP growth in the second quarter of 2011-12. Finance Minister said, "To what extent it (slowdown in IIP) would affect, it would be premature to make any assessment."

For the first quarter of 2011-12, country’s GDP growth fell to six quarter low at 7.7% compare to 8.8% in the same period of 2010-11. For the current fiscal year, government expects Indian economy to grow by 8.5%. However, many agencies including Reserve Bank of India (RBI), have done downward revision in their estimates for the current financial year, because of the slowdown in global economy and hovering inflation, which is affecting the demand, hence the growth.

Although, July IIP data has been revised upwards from 3.3% to 3.8%, on this upward revision finance minister said that "The silver lining is that IIP has improved from July figure... But compared to corresponding period of previous year, it is quite low,"

Meanwhile, the economic affairs secretary R Gopalan said that the slowdown in the IIP numbers is a matter of concern but expressed confidence that the figures would improve from here. "It is a cause of concern. But as we go along, if you see the previous year, always second half IIP numbers have been good," he added.
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