Industrial Recovery Still Long Way

Industry to Recover www.purnartha.comAfter scaling a five-year-high growth of 9.9% in October, industrial output contracted 3.2% in November 2015, its sharpest drop since October 2011, as one-off factors like an unfavourable base effect due to a shift in the festive calendar and floods in Chennai drove down production, reports fe Bureau in New Delhi. Official data released on Tuesday also showed retail inflation inching up to 5.61% in December, its highest since September 2014, marking a fifth straight monthly rise. While analysts feel the November index of industrial production (IIP) data should be viewed with a pinch of salt, given the fewer working days due to the Diwali (the festival fell in October in 2014), the intensity of contraction surprised them.

Both the IIP and inflation data, however, reinforce fears that a sustained industrial recovery is still some way away, while inflation may remain sticky even though analysts believe the consumer price index (CPI) inflation will still be lower than the central bank’s target of 6% by January. Moreover, the impact of an unfavourable base for retail inflation will wear out from this month.

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