Industrial output rebounds to 6.8%

Doubts Over Data As Production May Have Shrunk 0.6% Sans 92.6% F&B Growth

New Delhi: Industrial production surprisingly bounced back to grow 6.8% in January as government data showed that Indians consumed more manufactured food products, beverages and chewing tobacco during the month. Probably anticipating that their health had improved, manufacturers decided to cut vitamin, fruit pulp and antibiotics output by as much as 54%, data released by the Central Statistics Office on Monday showed. 
    If the data is to be believed, newspaper production went up 57% and pen output was 32% higher, indicating that consumers were reading and writing more. In the absence of an unprecedented 92.6% growth in the food and beverages segment, overall factory output would have contracted 0.6% in January, economists estimated while raising fresh doubts over data quality. 
    "Quality issues in economic data are more pronounced in emerging economies than developed economies but India's official industrial production takes the cake. It appears to have alife of its own and its volatility makes sensible forecasting a challenge and also increases the risk of policy mishaps due to incorrect signals," Rajeev Malik, senior economist at CLSA, said in a research note. 
    Citi's Rohini Malkani and Anushka Shah added, "Industrial production data has displayed a lot of volatility, with even RBI stating that it is 'analytically bewildering… and how poor quality data could potentially mislead policy calculations'." The spurt came even as mining activity contracted and output in three of the six manufacturing segments — capital goods, intermediates and consumer durables — fell. But consumer goods ( 20.2% growth) and non-durables (42.1%) made up for the fall in the other manufacturing segments. 
RBI likely to leave rates unchanged 
Mumbai: Strong industrial production, expensive crude and a weak rupee are likely to deter RBI from cutting key interest rates in the March 15 policy review. "We were expecting a 50 bps cut in CRR without any change in the repo and reverse repo rates in the March 15 meeting. With the RBI effecting a CRR cut, we believe that the March 15 monetary policy is likely to be a non-event," said Indranil Pan, chief economist, Kotak Mahindra Bank. 
    "Today's positive data confirms our view that the RBI will not cut the policy rate during this Thursday's meeting, especially as it has already acted by cutting the CRR by 75bps," said Taimur Baig and Kaushik Das, economists with Deutsche Bank, in a report. TNN