Mixed signals on industrial production: Economic Survey

IIP recovered in Oct 2012 showing 8.3% growth, however entered into negative zone in subsequent months

Industrial production presents a mixed picture of sluggishness bottoming out as well as continuing for a little longer period, the Economic Survey 2012-13 said today.     

The industrial production measured on IIP made a smart recovery in October 2012 by showing a growth of 8.3%, but entered into negative zone in the subsequent two months.     

"Notwithstanding a pick-up in industrial growth observed in October 2012, there are mixed signals on whether the slowdown phase has bottomed out or the current sluggishness would persist a little longer," the Survey said.     

Overall industrial performance, continued to moderate from first quarter of 2011-12 with growth turning negative in first quarter of 2012-13, before improving to 2.1% in October-December quarter of 2012-13.     
The Survey, however, said there are at least two factors which suggest some optimism on the industrial front.     

Firstly, data on frequency distribution of products/product groups, which constitute the IIP, indicate the number of products with a negative growth has declined from 182 in fourth quarter of 2011-12 to 160 in October-November, 2012.     

The second factor showing optimism is the RBI's business expectation index, which recorded moderately positive growth in third quarter of 2012-13, after persistent negative growth for the previous six quarters.     

The index tracks IIP growth fairly closely and this suggests a possible bottoming out of IIP growth moderation.     

As per the survey, latest data indicate the growth of the sector could remain moderately positive at around 3% for the current year.     

Growth in IIP during April-December stood at 0.7% against 3.7% year-on-year. The survey said IIP growth remains vulnerable to several domestic factors and external shocks.