IIP output jumps 8.8% in June 2011

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IIP output jumps 8.8% in June 2011
India's Index of Industrial Production (IIP) grew at the fastest pace at 8.8% in June as compared to 5.6% in May. The growth was far above than market expectations of around 5.5% growth for June 2011. The growth was high due to recovery in manufacturing sector and capital goods.

Manufacturing sector which contributes 75% of the overall items of the Index grew from 7.9% to 10% year-on-year (y-o-y) basis.

Output of capital goods sector went up drastically from 3.7% to 37.7% y-o-y basis.

The growth of basic goods was at 7.5% against 7.2% in May.

The electricity sector growth was seen at 7.9% as compared to 3.5% previous year.

The sectors which underperformed were Mining sector, Intermediate goods, Consumer goods and Non-durable consumer goods with the production in mining sector declined from 6.9% to 0.6% y-o-y basis,

Intermediate goods growth went down from 8.5% to 1.9% on yearly basis.

Non-durable consumer goods (FMCG) production also saw a slowdown in growth to 2.1% in June, compared to 7.5% expansion a year ago, while growth in consumer durables output also fell sharply to just 1% from 21.2% a year ago.

India also registered a rise in exports to 82% for the month of July from a year ago to $29.3 billion while imports rose 51.5% to $40.4 billion, as per the data released by government.

Domestic demand has slowed down in India, mainly due to high interest rates and corporates have asked the central bank to stop hiking rates as they fear that will hurt growth and private investment.

But high food inflation at 9.90% might prompt Reserve Bank to ponder on the policy measures.

RBI has increased borrowing costs 11 times since mid-March 2010. Its repurchase rate is 8 percent.


Read more about: economy, inflation, rbi
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