IIP slips to 0.6% in Feb; may prompt RBI to cut rates

Sharp slippage in industrial growth to 0.6 per cent in February coupled with marginal moderation in retail inflation has raised expectations of a rate cut by the Reserve Bank next month to boost growth.
Showing slump in the economy, the Index of Industrial Production (IIP) slipped to 0.6 per cent in February from 4.3 per cent in the corresponding month a year ago, mainly on account of contraction in power generation and mining output and poor performance of manufacturing sector.
Retail inflation, according to the Consumer Price Index (CPI) data released today, declined marginally to 10.39 per cent in March, snapping the five month rising trend, as prices of vegetables and protein based items eased.

Planning Commission Deputy Chairman Montek Singh Ahluwalia took some satisfaction from the fact that the IIP data was not in the negative and expressed hope the factory output would show improvement in 2013-14.
"I think it (IIP growth in February) is consistent to what we have been saying that 2012-13 was not a good year and (the economic growth in) 2013-14 would be a lot better...I am glad that it (IIP) is not negative but it is very low," Ahluwalia told reporters.
These two numbers -- IIP and CPI--, according to experts, would prompt the RBI to cut interest rate in the annual credit policy due on May 3 with a view to encouraging investment and boosting growth.

Commenting on these numbers, Crisil Chief Economist D K Joshi said: "interest rate will come down as growth is weak. I think RBI will cut rate slightly... CPI numbers and industrial production numbers are beyond comfort level."
PHDCCI President Suman Jyoti Khaitan pitched for 100 basis points (1 per cent) cut in short-term interest rate by the RBI in its forthcoming credit policy, saying such a step was necessary to improve investor sentiments and promote growth.