Feb Industrial Output At 4.1 Per Cent, Jan Data Revised Downwards To 1.1 Per Cent

At a time when the country is facing severe external pressure as a result of economic slowdown in the developed nations of Europe and America and rising crude oil prices, an investor may look toward its local government to provide some respite and much-needed solace. However, people’s confidence in the Indian government seems to be deteriorating with every passing day, thanks to some unreasonable and disappointing set of decisions made by the center.

Blame it on the over-the-top growth estimates made in the Union Budget of 2011-12 or the imposition of some unruly policy decisions and retracting on certain key policies - it all seems to have gone askew for the government. The most recent disappointing blow that the government has delivered to the markets is its bizarre revision in the industrial production (IIP) data for the month of January.

According to a press release by the Central Statistics Office (CSO), the factory output data for January now stands at 1.1 per cent, sharply lower than the previously announced 6.8 per cent. This revision has been done on account of an error committed while computing the sugar production for January 2012.

It is astonishing to see this sharp downward revision in industrial output data which is regarded as a very crucial parameter used to gauge the economic growth of a country. Market experts had heavily questioned the authenticity of the January IIP data earlier when it was released in February when growth was pegged at the erroneous figure of 6.8 per cent. This recent revelation comes as a nail in the coffin for the government.

While the January IIP series now stands revised, the data released for February 2012 suggests that industrial activity seems to have improved to 4.7 per cent as against the revised 1.1 per cent for January. On a yearly basis though, industrial output has declined from 6.7 per cent in February 2011. It was surprising to see the data for mining output and capital goods output bounce back into the positive territory despite the two sectors continuing to languish behind. In fact, this is the first time since August 2011 that the mining output has become positive.

Meanwhile, manufacturing output and consumer goods’ outputs have de-grown considerably with CG plunging into the negative growth zone. In conclusion, we don’t expect the RBI to give any consideration to the IIP numbers as they become less relevant. Even more so, after the recent revision the markets have also turned a blind eye to industrial output.