Jan IIP gains pace at 2.6%

The Industrial output growth performed better than expected at 2.6% in January from 1.7% in December while CPI inflation rose to 5.37% in February from 5.11% in January.

The CPI inflation rose for the third straight month, government data showed on Thursday.

The country’s statistics department started using 2012 as the new base year in place of 2010 for measuring retail prices last month. It has lowered the weighting for food and fuel items in the revamped price index.

The industrial growth was mainly driven by growth in the capital goods sector.

However, this also raised the issue of quality of the Index of Industrial Production (IIP) data as December figures were  sharply revised upwards from 1.7% estimated earlier.

Besides, IIP was shown to contract 4.2% in October, which now stood revised to a fall of 2.6%.

The IIP growth had stood at just 1.1% in January last year.  

Apr ’14 May ’14 Jun ’14 Jul ’14 Aug ’14 Sept ’14 Oct ’14 Nov ’14 Dec ’14 Jan ’15
3.7 5.6 4.3 0.93 0.5 2.8 (-)2.6 3.8 3.2 2.6

However,  there are still signs  of worry as consumer durables continued to decline. It contracted 5.3% in January. Besides, intermediate goods declined 0.5%.

Capital goods production rose 12.8% in January.Most of the rise in IIP came from capital goods alone.

Among broad sectors, mining woes still continued. Its output fell 2.8% in January against 2.7% rise a year ago.  Manufacturing, which has the highest weight  of 75.5% in IIP rose just 3.3% against 0.3%. Electricity generation grew at less pace of 2.7% in January against 6.5% a year ago. This may have some impact on industrial production in months to come.

The relevance of IIP has declined a bit in terms of its contribution to gross domestic product. However,  to understand industrial activities in volume terms, IIP still has importance.

  Dec, 2014 Jan, 2015 Feb, 2015
CPI Inflation 4.28% 5.11% 5.37%
Consumer price index-based inflation on the revised base of 2012 (against 2010) and changed weights of various items based on 2011-12 consumption expenditure survey (against 2004-05 survey)
CPI Inflation for February
  Rural  Urban  Combined
Food Inflation 6.34 7.52 6.79
Overall Inflation 5.79 4.95 5.37
Source: Ministry of Statistics and Programme Implementation (MoSPI)