IIP growth likely to remain 1-2% in January: D&B

Though govt has started taking measures; RBI has initiated easing the monetary policy, its impact on industrial activity is likely to take some time

The country's industrial output is expected to remain subdued but in the positive range of 1-2% during January due to moderation in consumption and weak external demand, a Dun & Bradstreet report says.

According to the research firm, though the government has already started taking measures and the RBI has initiated easing the monetary policy, its impact on the industrial activity is likely to take some time.

"IIP is expected to remain volatile and IIP growth is expected to remain in the range of 1-2 % during January," the report said.

The industrial output contracted by 0.6% in December registering the second consecutive month of decline.

"The sustained volatility in the industrial activity indicates that the revival in growth would be delayed than expected.

"This raises hope that the RBI would continue to ease its monetary policy to boost confidence and support the industrial activity going ahead," Dun & Bradstreet India Senior Economist Arun Singh said.

The report further said that while the moderation in the consumption demand is expected to slow down the manufactured products inflation, upside risks to overall inflation in the medium term persists from the gradual hike in the diesel prices and increase in global crude oil prices.

D&B expects the WPI inflation to remain in the range of 6.3-6.5 % in February 2013 and CPI inflation continuing to hover above the double digit at around 10.7 %-10.9 % in January.

"The divergence in the WPI and CPI inflation points to the prevalence of the structural bottlenecks which needs to be addressed," Singh said.

The central bank had last month lowered interest rates by 0.25 % saying that with inflation showing signs of remaining range bound, it was now critical to arrest the loss of growth momentum.

According to the advance estimates of Central Statistical Organisation (CSO), the GDP growth in the current fiscal is likely to be 5 %. However, the government expects it to be over 5.5 %. The economy grew by 6.2 % in 2011-12 fiscal.

Regarding the upcoming Union Budget of 2013-14, Singh said it is expected to address the structural bottlenecks and deliver measures which would bring about stability, reinforce the growth prospects and also instill confidence among companies, Singh added.