Friday, June 10, 2011

April IIP growth at 6.3% versus 13.1% YoY as per new series :

NEW DELHI: India's industrial output in April rose 6.3 percent from a year earlier, government data showed on Friday. Manufacturing output, which constitutes about 80 percent of the industrial production, rose an annual 6.9 percent, the Central Statistics Organisation said in a statement.

The data was the first of a new series with a different base year of 2004/05, new components and weightings.

Under the old series, annual industrial output growth in April was 4.4 percent compared with a median forecast for a 5.5 percent rise in a Reuters poll.

Industrial output grew 7.8 percent in the 2010/11 fiscal year that ended in March, slower than 10.5 percent clocked in the previous fiscal year.

The new Index of Industrial Production is with an updated base of 2004-05 starting from the month of April.

The index was launched by Ministry of statistics and programme implementation (Mospi) with all the data points from 2005 onwards. This step completes the updating process of the three most widely followed macroeconomic indicators released by the government. The GDP series and WPI series were shifted on to the new base (2004-05) much before.

The new series also has a wider basket of goods with the manufactured items covered in the index going up from 281 to 410. The total number of items under the series has gone up to 695 from 538 earlier.

Researchers had long argued for a more timely launch of the new series as the older series was showing a very high degree of volatility. The new series is expected to capture the industrial production process more accurately, increasing its reliability.

The new series was supposed to have been launched last year but got delayed as due to concerns raised by various ministries regarding how the output growth was depicted. The series was then slightly modified to better reflect the status of the economy.

Finance Minister Pranab Mukherjee has warned that revenue growth target for this year is "challenging", a change in tune from an irascible optimist about the economy that has triggered concerns tax collections may drop sharply as economic activity slows.

Analysts viewed his comment, the first time the finance minister has articulated revenue concerns, as a somewhat formal admission by the government that it had doubts on being able to meet its tax collection target, which could in turn have knock-on effects on a raft of other macroenonomic numbers. Pranab Mukherjee has pegged that growth projection at 8.75 per cent (plus/minus 0.25 per cent).

Rising inflation and slowing demand would moderate India's economic growth to 8 per cent during 2011-12 from 8.8 per cent in the previous fiscal, said a World Bank report.

Food inflation aceelerated in the last week of May to its highest in eight weeks as prices of cereals, vegetables and milk hardened, indicating that headline inflation may remain sticky in the month.

The index for food articles rose 9% for the week ended May 28, up nearly a percentage point from 8.1% in the previous week, data released on Thursday showed.

Fuel inflation remained unchanged at 12.5%. Food and fuel articles together have a 29% weight in the wholesale price index. Fuel inflation has been over 12% all through May while food inflation has firmed up from 7.5% at the beginning of the months. Headline inflation in April was 8.66%. The data for April will be released on June 14.

Economists expect a good monsoon to temper the pace of food price rise. "The current spike has to be viewed as transitional and going forward, food inflation would depend on the progress of monsoons," said Saugato Bhattacharya, senior vice-president, Axis Bank .

Even the government is counting on good rains to moderate price rise.
Source : ET

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