Industrial output growth rose to a surprising 13-month high of 5.7 per cent in November as retail inflation slowed to a 25-month low in December by a sharp decline in vegetable prices. November industrial output data should bring good news to policymakers as the numbers released last week showed that the controversial demonetisation move has not made any significant impact on industrial growth.
Data released by the Central Statistics Office shows that industrial output grew an annual 5.7 per cent in November as compared to a decline of 3.4 per cent in the year earlier period. The sector had declined 1.8 per cent in October. Growth in November was helped by the favourable base effect and the performance of manufacturing, capital goods, and consumer durables sectors. Between April and November, industrial output growth rose 0.4 per cent as compared to 3.8 per cent expansion in the year ago period, reflecting the sluggishness still persisting in the sector.
However, economists said it was too early to predict whether the November data had shrugged off the impact of demonetisation. "The positive IIP numbers have come as a surprise. Prima facie, it looks like the effect of demonetisation has been nullified by the huge negative base effect. However, this growth needs to be seen with caution, whether it is sustained in the coming needs to be seen," said Madan Sabnavis, chief economist at Care Ratings. Manufacturing sector rose 5.5 per cent in November as compared to a decline of 4.6 per cent in November 2015, while mining rose an annual 3.9 per cent as compared to 1.7 per cent in the year earlier period.
The capital goods sector, which is seen as a key gauge of industrial activity, rose 15 per cent in November compared to a decline of 24.4 per cent in November 2015. The consumer durables sector rose 9.8 per cent compared to a growth of 12.2 per cent. The electricity sector grew 8.9 per cent in November compared to 0.7 per cent expansion in November 2015. Separate data released by the CSO showed retail inflation slowed to a 25-month low of 3.4 per cent in December. Inflation as measured by the consumer price index was 3.6 per cent in November. Food inflation slowed to 1.4 per cent in December compared to 2 per cent in the previous month, largely on the back of a 14.6 per cent decline in vegetable prices and 1.6 per cent contraction in prices of pulses. Sugar and confectionery remained a pressure point rising an annual 21 per cent in December.
