August IIP comes in at paltry 0.6% Vs 2.8% in July

The industrial output data for the month of August came in at a lower-than-expected 0.6 percent versus 2.8 percent in July. A CNBC-TV18 poll had pegged the number at 2.5 percent. The July IIP data was revised to 2.8 percent against 2.6 percent earlier. The manufacturing sector witnessed a contraction of 0.1 percent versus a growth of 3 percent in July. Consumer goods sector also witnessed negative growth of 0.8 percent. Capital goods sector also contracted at (-)2 percent versus 15.6 percent in July. While the basic goods production grew at 1.5 percent versus 1.7 percent in July, the electricity sector production grew at 7.2 percent versus 5.2 percent in July.

The non-durable goods growth was reported at 5 percent versus 6.8 percent in July. PMEAC chairman C Rangarajan said the data is certainly disappointing. However, he expects an improvement in the data as the year progresses. “I am really hoping for a better performance in the second half. Going ahead, I think we should see improvement,” he told CNBC-TV18 in an interview. When asked whether contraction in consumer goods will leave RBI with any repo action, Rangarajan said it is best to wait until the inflation numbers come in and watch what is happening in the foreign exchange market.

Those are the two major concerns as far as monetary policy is concerned, he added. Meanwhile, Rangarajan said growth rate of around 5.2-5.3 percent, projected earlier, is still possible. "I still think that improvement in exports should also contribute to the improvement in the overall industrial production," he added. Deputy chairman of the Planning Commission, Montek Singh Ahluwalia also said that the numbers were disappointing. "One would hope that the industrial sector would pick up in the months ahead. We should do better", he added.

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