India's industrial production grows 2.7% in March'17

The Central Statistics Office (CSO) revamped the index of industrial production on Friday by shifting to a new base year, deleting "irrelevant" items such as calculators, gutka and colour picture tubes, and inducting new items to better reflect changes in the industrial sector over the years.

In the new IIP series, the "basic goods" category has been replaced with "primary goods" and a new "infrastructure and construction goods" category has been included.

"We don't really see an interest rate cut any time soon; it will remain stable at the current level and even if inflation breaches the 4 percent level in the coming months, the RBI will continue to be on wait-and-watch mode", said Karan Mehrishi, ‎lead economist at ‎SMERA Ratings Limited.

"The new series shows higher growth rates in most months during April 2012 and March 2017 compared to the existing one (2004-05)". The new series of IIP will include technology items such as smartphones, tablets, LED television and tablets.

The number of items has been increased from 676 to 697.

- India's inflation likely cooled in April due to lower food prices, but the pullback may not give the Reserve Bank of India enough leeway to ease monetary policy anytime soon, a Reuters poll found. The IIP growth was 5.5 per cent in March 2016, while for 2016-17, factory output grew by 5 per cent as against 3.4 per cent in the year-ago period. Also, the electricity sector will now be a single item group that includes data relating to average rate of sale of power by generating stations to distributors. While 146 items, including Coke (Coal), papad, video CD player, khandsari and light diesel oil, were dropped under the new series.

According to agency reports, India registered a 2.7 per cent rise in the industrial output in March as against 5.5 per cent a year ago. However, it won't end the notorious fluctuation in certain IIP segments, particularly capital goods, because volatility is linked to the production pattern.

"The new WPI series indicates a sustained trend of lower annual inflation rates when compared with the rather dated 2004-05 base, underscoring the importance of regular updation of the base to ensure that policy makers have access to timely and accurate information while framing policies in a dynamic economic environment", Aditi Nayar, principal economist with ICRA, said.

Vanessa Coleman

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