Home > Economic Growth, Six Core Infra > Volatility in IIP continues

Volatility in IIP continues

The index of industrial production (IIP), which reflects industrial activity in India, rose 5.6% to 309.1 in August 2010, compared to the year-ago level. Growth was way below the Bloomberg News survey estimate of 9.5% gain. The YoY growth during April-August 2010-11 was 10.6%.

IIP growth in August 2010 too was lower than the 15.2% figure of July 2010. Also, there has been an upward revision in growth rate for May 2010 (from 11.3% to 11.5%) and July 2010 (from 13.8% to 15.2%).

The high volatility in industrial output data ―raises some doubts about how effectively the index reflects the underlying growth momentum, says the Reserve Bank of India. India‘s industrial output has fluctuated since May, when it registered an 11.5% expan-sion. Growth decelerated to 5.8% in June, followed by 15.2% in July. While industrial output may have got a boost by higher auto-mobile and consumer durable numbers, the index of six core infrastructure sectors has been a drag.

Data has been most inconsistent in capital goods. The sector grew 34.2% in May, followed by a decline of 0.3% in June and a 72% surge next month. The latest figure — for August — shows a 2.6% decline. Also, IIP has a very old base year (1993-94) and there-fore outdated weights and a fixed frame of products and companies. Scores of new but popular products are not included in IIP.

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