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23
January 2017
Descibing
the official data on the index of industrial production (IIP) for November
2016, during which demonetisation was announced, as a "false
positive", Crisil Research has said that the latest IIP figures do not
reflect the true condition of the Indian manufacturing sector. The Total Investment & Insurance
Solutions
Belying
popular expectations, India's factory output, as measured by the IIP released
earlier this month, rose 5.7 per cent in November, the first month of the
government's demonetisation drive. Index of Industrial Production in October
had declined by 1.81 per cent, while there was a 3.4 per cent slide in the
corresponding month of last year. The
Total Investment & Insurance Solutions
"The
index of industrial production grew by 5.7 per cent on-year in November, on
account of a weak base. Going by the production trend in some sectors such as auto,
next month's (December) IIP growth data may be more indicative of the impact of
demonetisation," said a note by Crisil, a subsidiary of American ratings
agency Standard & Poor's. The Total
Investment & Insurance Solutions
"The
IIP base year has not been updated," said Crisil Chief Economist D.K.
Joshi.
He
explained "false positive" as a term used in data analysis.
"The
term implies that the growth rate indicated is too high. It was expected to be
in the negative zone as November was the first month to have captured the
impact of demonetisation," Joshi said.
"IIP
had fallen by 1.8 per cent in October. In November it suddenly shoots up, and
so we say it is not a true reflection of the condition of manufacturing,"
he said. The Total Investment &
Insurance Solutions
"Such
month-to-month the data is too volatile, it cannot be used to make long-term
projections," he added. The Total
Investment & Insurance Solutions
Besides,
the cumulative growth of the country's factory output for the April-November
period at 0.4 per cent, was much lower compared to the cumulative growth of 3.8
per cent during the corresponding period of the last fiscal. The Total Investment & Insurance
Solutions
Prime
Minister Narendra Modi had on November 8 announced demonetisation of Rs 500 and
Rs 1,000 currency notes, saying the move was aimed against black money,
counterfeit currency and terror financing. The unprecedented measure set off a
massive cash crunch, while citizens were given till December 30 to deposit the
old notes in the banks.The Total
Investment & Insurance Solutions
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