InvestorQ : Why did industrial growth once again dip lower into negative for Indian economy?
diksha shah made post

Why did industrial growth once again dip lower into negative for Indian economy?

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3 months ago
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The index of industrial production disappointed the markets in November 2020 after a relatively good performance in October and September. In fact, IIP dipped into negative level of -1.9%. Unlike CPI, which is published for the latest month, the IIP is published with a lag of one month but it tends to be a good lead indicator of the direction of GDP growth.

The latest IIP was a tad disappointing as this fall came after two successive months of positive IIP growth. In fact, the IIP growth in October 2020 had improved sharply to +4.19%. If you break up the components, then there was deterioration in IIP momentum across the board. This was already evident in the high frequency indicators like PMI and core sector.

While mining slipped deeper into the negative, the weighty manufacturing moved from positive to negative growth in the month of November. Even electricity generation and transmission did lose a lot of momentum as it fell by over 800 bps. Weak growth has been one of the key considerations of the RBI MPC and this indicates that RBI could maintain its low rates and easy liquidity stance for the time being.

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