Inflation, IIP numbers comforting

Industrial production up 7.3% in march; inflation at 18-month low of 7.7% after four month of slow growth, industrial production growth in march beat forecasts to grow 7.3%.however, the industry remains caution about growth ahead due to rising interest rates.  

Finance Minster Prenab Mukherjee said that the comforting news on the inflation front with food inflation moderating from 8.53% to 7.70% is matched by turn-around in index of industrial production (IIP) for March 2011.mukherjee said that within     the industrial sector, the manufacturing sector with a weight of almost 80% grew 7.9%. There is also a revival in the growth of Capital goods with the index growing 12.9% after three months of negative growth, he said.

However, the FM cautioned that these weekly and monthly cycles of bad and good news must be treated without over reaction. "The good news that we have got this week both other prices front and on industrial production must not be overintrepreted, just as we must not get overly pessimistic when the economy does badly during a week or month," he said.

Kisaly kanth, senior director, Maoe Securities said the IIP growth was higher than market expections.he said this figure is less than last year, but is still good given that the last 4-5 months IIP growth rates were very volatile. the improved growth rates in manufacturing segment will have to sastain through next3-4 months for things to become comfortable.

Chandrajit Benerjrr, director general, CII, said that the chamber expected the momentum to pick up amid some softening of global commodity prices. However the CII remains concerned that the steep rise in interst rates will have a negative impact on both consumer demand as well as investment activities.

  Rajiv Kumar, director general, FICCI, said: "unfortunately, the somewhat improved that don’t indicate a rising trend in the manufacturing sector is going to slowdown in the coming months because commercial banks have raised interest rates further, which will affect investments in the sector. Profitablity of the manufacturing sector in the last quarter had fallen as a result of the steep rise in prices of commodities and raw materials."