Contraction In IIP Not Surprising, Say Experts

Government data released on Tuesday showed that the Index of Industrial Production (IIP) for the month of November contracted by 1.9% to 126.3 when compared to 3.6% growth in October. The contraction in IIP data is not surprising say experts.

Rajani Sinha, Chief Economist & National Director - Research, Knight Frank India, says, "The contraction in IIP for November is not surprising as the other high frequency economic indicators were also showing a moderation in growth. A lot of economic revival seen in the previous few months had been because of pent-up demand and festive demand, hence the growth momentum was expected to moderate. With daily COVID infection rate reducing, vaccine round the corner and the economy close to normalcy, the critical aspect will be at what level the growth momentum stabilizes."

Another set of data that was also out was the CPI Inflation numbers, which came in at 4.59 per cent for the month of December.

"The moderation in CPI inflation has been mainly because of sharp fall in food inflation, which has been possible due to fall in vegetable prices, even while protein inflation has remained high. The critical aspect is that other components of inflation, including core inflation has remained sticky at around 5.2%. While the fall in overall inflation at this juncture is a welcome relief, RBI will be closely watching core inflation as demand