C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council, said: “The number is welcome. It is a cheerful number. I think the second half of this year will be good… better than the first half. Overall, industrial growth is around 7 per cent. Therefore, we may or may not be able to see a growth of 8 per cent in October, but a growth in the region of 7 per cent is still acceptable.”
"The industrial output numbers are very encouraging," Finance Minister P. Chidambaram said.
The IIP number for September was revised from (-) 0.4 per cent to (-) 0.7 per cent.
The indices of industrial production for the mining, manufacturing and electricity sectors for the month of October 2012 stood at 122.5, 181.9 and 160.5, respectively, with corresponding growth rates of (-) 0.1 per cent, 9.6 per cent and 5.5 per cent as compared to October 2011.
The cumulative growth in the three sectors during April-October 2012-13 over the corresponding period of 2011-12 has been (-) 0.7 per cent, 1 per cent and 4.7 per cent, respectively, government data showed.
An NDTV poll of 13 brokerages had expected IIP to have grown by 5.4 per cent in October, buoyed by a 6.5 per cent growth in the infrastructure sector in the same month. The brokerage estimates ranged from 3.6 per cent to 7 per cent.
“The effect is combined of improvement in some sectors. I believe that it is the combined effect of low base plus a good growth in some sectors,” Mr. Rangarajan added.
TOO EARLY TO CELEBRATE?
Despite the better than expected numbers, analysts sounded a note of caution, saying the increase could be a result of the low base in September and the festival season in October-November.
“There is scope for a downward revision. If the fine print suggests that it is on the back of two or three sectors which have shown really good growth, then we should question the veracity of the numbers,” Abheek Barua, chief economist at HDFC Bank, told NDTV.
Brinda Jagirdar, chief economist at the State Bank of India, told Reuters that the uptick in industrial performance is optical, masking the reality, largely because of base effect.
“I don't expect this kind of buoyancy in manufacturing to sustain going forward as five industrial sectors are showing negative growth. I don't think the RBI (Reserve Bank of India) should be swayed by this number and should address the underlying weakness in the economy by cutting rates," she added.
Shubhada Rao, chief economist at Yes Bank, told Reuters that the festive-related buoyancy had pushed the IIP number. “Overall, the seasonally adjusted month-on-month growth is 2.7 per cent. However, stripping out the festive-related buoyancy, we continue to expect gradual pace of recovery in the overall economic activity.”
Factory output accounts for a little more than 15 per cent of India's economy, which has grown at annual rates of 5 to 5.5 per cent each quarter since the start of the year, the slowest rates in nearly three years.
Montek Singh Ahluwalia, the Deputy Chairman of the Planning Commission, told NDTV last week that expectations should be realistic as reform policy announcements have a lag effect of at least six months before the benefits start to show up.
Shashank Srivastava, executive director at Maruti Suzuki India, said: “Demand post Diwali has not been so great. Fuel price continues to be high. I think it will be difficult to continue the pace going forward. The base is so high, that I think that achieving higher growth will be difficult. It is not likely to be as high as these figures show for the auto sector. It is only short term that we are looking at this. In the long term, we are looking at very good growth, very robust figures, in fact.”
In a note on the Indian economy, Standard & Poor's said it expects only modest progress in this fiscal year as general elections due by May 2014.
India's high fiscal deficit, heavy debt burden remain most significant rating constraints, the rating agency said, adding that the government's high fiscal deficit target of 4.5 per cent of GDP for 2014 is beyond reach.
India’s trade deficit eased marginally in November to $19.3 billion (Rs 1,04,834.43 crore) compared to $21 billion in October 2012, government data showed. Exports fell 4 per cent year-on-year (YoY) to $22.3 billion in November, while imports jumped to $41.5 billion.
Brokerage Nomura said the country's external sector remains in a "precarious state" after the trade deficit data was announced.
On a positive note, Moody’s said yesterday that the withdrawal of support to the government by an “obstinate coalition partner” and a flurry of reforms had improved India's growth prospects in 2013.
The government has been able to push through economic reforms, especially allowing foreign investment in multi-brand retail, after the withdrawal of support by Trinamool Congress.
"...(growth prospects have improved) with a new Finance Minister, the withdrawal of an obstinate coalition partner and a flurry of pro-business reforms designed to lift the economy from its funk.. these moves are working," Moody's said in its report.
India's annual consumer price inflation accelerated to 9.9 per cent in November from the previous month, government data showed today. Food prices for consumers rose by 11.81 per cent in November from 11.43 per cent in October.
India's retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa - and is above what the Reserve Bank of India (RBI) calls its comfort level.
The government is set to announce the wholesale price inflation on Friday, December 14, 2012.
With inputs from agencies