EW DELHI: Industrial output rose at a faster-than-expected 9.1 per cent in September from a year earlier, data showed on The median forecast in a media poll was for an annual rise of 7.3 per cent. Manufacturing production rose 9.3 per cent in September from a year earlier. August's annual industrial growth rate was revised up to 11 per cent from 10.4 per cent previously. Industrial output rose 2.6 percent in the 2008/09 fiscal year (April-March), down from 8.5 per cent in 2007/08. The 10-year benchmark bond yield rose 2 basis points after industrial data came in better than market expectations. The yield on the 10-year benchmark bond rose to 7.36 per cent from 7.34 per cent before the data. At 12:11 pm it was trading at 7.35 per cent. It closed at 7.33 per cent on Wednesday. | |
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Other Stories:
FDI inflows dip to $1.5 bn in Sept Export shrinks slower at 11.4% Indirect tax collections drop 13% to Rs 25,495 cr in Oct Strong IIP data adds to stimulus debate Food price index rises 13.68 pct year/year October 31
Sept IIP up 9.1%; Experts cheer data but differ on upgrades
he Index of Industrial Productivity for September is up 9.1% as compared to 11% month-on-month and 6% year-on-year. A CNBC-TV18 poll had seen it up 7.14% as against 10.4%.
The August IIP number has been revised to 11% as against the provisional number of 10.4%. Industrial growth in the April-September period grew by 6.5% as against 5% YoY. Also see: Markets volatile, recovers post IIP data
Consumer durables and capital goods were the key contributors to the upmove.
| IIP movement in 2009 | Numbers | |
| April | 1.1% | |
| May | 2.1% | |
| June | 8.2% | |
| July | 7.2% | |
| August | 11% | |
| September | 9.1% | |
| | ||
| Sectoral Growth | September | August |
| Manufacturing | 9.3% | 10.2% |
| Minning & Quarrying | 8.6% | 12.9% |
| Electricity | 7.9% | 10.6% |
| | ||
| Use Based | September | August |
| Basic Goods | 6.7% | 10% |
| Intermediate Goods | 10.8% | 14.3% |
| Capital Goods | 12.8% | 8.3% |
| Consumer Goods | 8.2% | 8.5% |
| Durables | 22.2% | 22.3% |
| Non-Durables | 2.6% | 3.7% |
CNBC-TV18’s Banking Editor Latha Venkatesh says these numbers are for a pre-Diwali month. “One may want to revise their figures and wait for the October number to check out whether the demand pool has remained even after the Diwali de-stocking and re-stocking. That might be something which analysts will want to weight before they work out their final numbers.”
So, will economists plan to upwardly revise most of their IIP numbers? Yes, says Samiran Chakrabarty, Standard Chartered Bank’s Head of Research. “If one looks at the last three months, on an average we are clocking numbers which are even better than what we did in the peak of industrial boom.”
But Sachchidanand Shukla, Chief Economist, Enam, is convinced yet. "We are seeing continuing traction in consumer durables because of the government dole outs or the sixth pay commission. We have a favourable base till December. We also need to see what happens to the basic and intermediate goods, which constitutes about 60% of the index. With export numbers now moving up, the contraction is now getting narrower. By January, we should turn positive on the export side. So, we will have to wait for the next two months to revise our numbers upwards. We believe the second half is going to be more than 9%."
GDP forecast for FY10:
Chakrabarty maintains the 6.4% GDP number for FY10. "Going forward, we will probably look at revising it after this industrial growth numbers." Enam, Shukla says, is looking at a 6.3% number. But he won't revise the figure upwards till December.
Is a rate hike on the cards?
Shukla sees the Reserve Bank hiking the cash reserve ratio (CRR) by December and cites three triggers to bolster his case. "One, if prices don't come off till December. Second, the base will boost the IIP numbers till December. If that trend continues, it will be another trigger. Third, will be capital flows which keep gushing into the economy. If all these three parameters are positive, the RBI will have to react on the liquidity front by a CRR hike by December. But for policy rates they will have to wait and watch till March."
No, says Chakrabarty. "I don't see it happening in December. This is very odd year in which year-on-year comparisons should be kept aside. This is not a year to look at those numbers. This is a year to look at softer issues in the economy, not just the domestic economy but also at a global sense to figure out whether this recovery that we are seeing is on a sound footing or not. The exit of monetary stimulus should take into account all those softer issues also – not just headline numbers – before taking a final decision. I think the RBI would probably wait a while to exit from an interest rate sense. From a liquidity sense, the exit could come much earlier."
Src: EconomicTimes, Moneycontrol.com
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