LD-IIP 2

"I am not concerned about low November number. There is
month to month volatility. We are on track as far as GDP
growth is concerned."
The sharp dip in industrial growth in India is all the
more concerning when viewed from the factory production in
China, which rose by 19.2 per cent in November, 2010.
However, industry voiced views against RBI's any move to
tighten monetary stance later this month, saying that any hike
would dent factory production further.
Industry chamber Confederation of Indian Industry said it
is disappointed with the sharp moderation in industrial
production.
"This should make the RBI more cautious about aggressive
tightening at its forthcoming policy meet," the chamber said.
CII advised RBI that inflation is high because of
expensive food items and should be tackled through supply-side
measures.
"Concerns on inflation should be tackled on the supply
side, given that it is being driven by a limited set of food
items where bottlenecks in distribution are the root cause,"
the chamber added.
Food products output showed a decline of 0.7 per cent in
November, 2010. Though, it reflects only processed food items,
shortage in supply of food items is one of the reasons for
this decline.
Food inflation has surged to over 18 per cent for the
week ended December 25.
Rise in inflation and dip in industrial production could
have adverse impact on the economy, though Finance Minister
Pranab Mukherjee said he does not like to arrive at any
premature conclusion.
"If IIP goes down and inflation goes up, it will have an
adverse impact, but I am not coming to any premature
conclusion," Mukherjee said.
The Reserve Bank has already raised policy rates six
times last year, but pressed a pause button at its December
policy review.
However, the central bank had clearly stated that the
pause was resorted to because of shortage of cash in the
system and should not be interpreted as reversal of tightening
monetary policy, since inflation is a major area of concern.
The sharp volatility in IIP numbers could be gauged from
the fact that industrial growth declined sharply to 6.91 per
cent in August from 15 per cent in July, and then further to
4.4 per cent in September. It again rose to over 11 per cent
in October and now November data showed sharp dip in numbers.
Rao said other data along with IIP data has to be
analysed to come to a conclusion. If one sees exports figures,
PMI data -- they all show a moderation. MORE PTI KKS
SAK


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