India's IIP For July Grows Flat At 0.1 Percent

By Sreeja VN | September 12 2012 3:29 AM

India's industrial output grew at a flat 0.1 percent in July, 2012, against the analysts' expectation of a 0.5 percent growth as compared to the same period a year ago, showed the data released by the Indian government Wednesday. The Index of Industrial Production (IIP) had contracted by 1.8 percent in June 2012.

Reuters

India's anemic infrastructure development has been blamed for the slow growth of the country's agricultural and industrial output.

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The cumulative growth for April-July, 2012-13, over the corresponding period of the previous year declined by 0.1 percent suggesting that the weakened economy shows no signs of recovery in the near future.

The mining sector recorded a decline of 0.7 percent compared to a 0.6 percent growth in June 2012, and the manufacturing sector output declined 0.2 percent in July 2012 as compared to the 3.2 percent decline in June, while the electricity sector grew at a modest 2.8 percent against 8.8 percent growth in the previous month, as recorded in the data released by the Central Statistics Office of the Ministry of Statistics and Program Implementation.

Consumer durables recorded a growth rate of 1.4 percent while consumer nondurables grew at a marginal 0.1 percent. In June 2012, consumer durables had recorded a robust growth rate of 9.1 percent while consumer nondurables declined 1 percent.

The basic goods grew 1.5 percent in June. However, the capital goods sector declined by 5 percent in July, better than the sharp decline of 27.9 percent in June.

The economists are of the view that though the data nothing to cheer about, it is indeed a relief from the contraction of growth a month ago.

"One of the things that we can look forward to, is a push from govt on the infra side - like road, coal power etc. Those could see a turnaround once that happens. But if we are talking about private sector investment, there will be a certain time lag for a pick-up in sentiment," said Aditi Nayar, an economist from ICRA, to NDTV Profit, a business news channel.

"The data highlights structural weaknesses of the economy, with poor domestic demand amid political gridlock and contracting exports," said Dariusz Kowalczyk, senior strategist at Credit Agricole CIB in Hong Kong to the Economic Times.

Though the data is expected to give strength for industries' demand for monetary easing, economic analysts believe that it is highly unlikely that RBI will change the key rates.

"It may lead to renewed expectations of a rate cut this month, although we believe that the odds still favor the RBI to stay put," Kowalczyk said.

India's BSE Sensex was trading at 17937.05, up by 85.02 points or 0.48 percent and NSE Nifty was up by 21.90 points or 0.41 percent at 5411.40 at 12.20 p.m. Wednesday.