A day after Finance Minister P Chidambaram described October's industrial output data as "green shoots of recovery", his chief economic adviser poured cold water on the exultation.
"We should not be overly influenced by one number; issues of base effects are there. We should take it as part of a pattern," CEA Raghuram Rajan told reporters at a press conference on Thursday.
Data released by the government yesterday showed the Index of Industrial Production (IIP) having risen by a 16-month high of 8.2 per cent in October. For a two-fold reason, it seemed; there was a low base effect, a five per cent contraction in the same month a year before, and there was a pick-up in demand during the festival season. The IIP had contracted 0.7 per cent in September.
Chidambaram had said he was "very encouraged" by the numbers. Journalists asked Rajan whether the growth in gross domestic product (GDP), 5.5 per cent in April-June and down to 5.3 per cent in July-September, taking the first half's growth to 5.4 per cent against 7.3 per cent in the year-ago period, would see revival in the second half. The CEA said economic growth was stabilising.
"Certainly, every move that the government is trying to make (will) help strengthen growth," he said at a press meet to announce an international conference on Reviving Growth', beginning tomorrow.
Rajan said as growth in the home economy would be influenced by any adverse developments in the US and Euro zone countries, there was a need to tap into domestic sources of growth.
"Clearly, India will be influenced by growth constraints in Europe. After all, our exports are part of the production. So, if exports are declining, as it has been recently, it will obviously influence the economy," he said.
Exports in November contracted 4.2 per cent for a seventh month in a row, to $22.2 billion, due to slowing demand in the US and European markets.