Nov IIP hits 4-year low: Jaitley has to work harder to fulfil Modi’s achhe din promise

The November factory output number is a crucial reminder to Union Finance Minister Arun Jaitley that not all is well yet in the real economy and he needs to work on his priorities well to save the Narendra Modi government’s high-growth agenda. Clearly, growth concerns should be dealt with much bigger urgency than inflation, which has so far obliged to the glide path of the Reserve Bank of India.The government should work to ensure investments (both on public spending and private sector commitments) sustain in the economy and there is a simultaneous demand-driven growth by putting more money into the pockets of common man. In the absence of these triggers, it will be difficult to even match last year’s growth numbers (7.3 percent) even with the revised down growth targets (7-7.5 percent as against 8-8.1 percent earlier). A painful slowdown in exports complicates the problem.
It’s seasonal and statistical
Having said this, the sharp contraction in November Index of Industrial Production (IIP), at a four-year low of negative 3.2 percent, compared with 9.9 percent jump in the previous month, is also on account of seasonal factors and base effect. The number does not warrant a panic since monthly IIP numbers are typically of high-volatile nature.