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IIP Growth Contracts 0.3% In December 2019

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IIP Growth Contracts 0.3% In December 2019
Rajat Mishra - 12 February 2020

India’s industrial output contracted in December and the IIP growth was 0.3 per cent compared to 1.82 per cent in November as per the data from the Ministry of Statistic and Program and Implementation. The IIP had grown by 2.5 per cent in December 2018.

The indices of Industrial production for the mining, manufacturing and electricity sectors for the month of December 2019 stands at 120.6, 134.2 and 150.2 respectively, with the corresponding growth rates of 5.4 per cent, -1.2 per cent and -0.1 per cent as compared to December 2018. The cumulative growth in these three sectors during April-December 2019 over the corresponding period of 2018 has been 0.6 per cent, 0.5 per cent and 0.8 respectively. However, indices of Industrial production for the mining, manufacturing and electricity sectors for the same month last year stood at 114.4, 135.8, and 150.4 respectively.

Out of 23 industry groups in manufacturing sector 16 has witnessed negative growth during the month of December 2019 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of Computer, electronic and optical products’ has shown the highest negative growth of -24.9 per cent followed by -20.3 per cent in manufacture of machinery and equipment.

On the other hand another indicator showing retail inflation in the economy is also released by the government on Wednesday, which shows that retail inflation spiked to 7.59 per cent in January 2020 from 7.25 per cent in December 2019.

“The sharp spike in food inflation has led India’s Jan CPI to breach a six-year high of 7.59 per cent compared to 7.35 per cent seen in December. It is the consecutive second month; CPI has breached the upper band of RBI’s inflation target. Unexpectedly IIP has contracted to 0.3 per cent in December from 1.8 per cent in November. Due to higher inflation, RBI has been maintaining a status quo since December 2019, if inflation continues to hover above 6 per cent and we don’t expect RBI to cut interest rate or change its accommodative policy stance,” said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

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