Industry may clamour for rate cut post the IIP and inflation numbers

Reviving hopes of economic recovery, industrial production grew at a 5-month high of 3.8% in November due to improvement in manufacturing and mining sectors as well as better offtake of capital goods. The factory output, as measured by the Index of Industrial Production (IIP), had declined by 1.3% in the same month of 2013.

Manufacturing output, which constitutes over 75% to the index, grew by 3% in November, compared to a dip of 2.6% in the same month a year ago.

Output of the mining sector grew by 3.4% in November, compared to a growth of 1.6%.  The production of capital goods, a barometer of demand, grew by 6.5% in November, as against a growth of 0.1% in same month of last year.

Overall, 16 of the 22 industry groups in manufacturing showed positive growth in November.

The IIP number, indeed, has bettered the street expectations of 2.2% but inflationary concerns turned out to be a dampner. 

Retail inflation rose to 5% in December from 4.38% in November. This inflation figure is still lower than the comfort level of the Reserve Bank of India (RBI) but the industry might step up its efforts to get a rate cut from the RBI. 

The retail inflation in the urban areas was higher, at 5.3%, as against 4.7% in rural India.