Industrial output slows further in September

India's industrial output slowed further in September from the previous month to touch a 16-month low, sending stocks and the rupee down while bonds rose. The data is bound to put the policymakers and the central bank in a fix as they grapple with erratic statistics on the one hand and high inflation on the other. Industrial output, as measured by the index of industrial production (IIP), grew by a paltry 4.4% in September 2010 versus 8.2% in the same month last year, the Commerce & Industry Ministry said. IIP for September 2010 had been forecast to grow by 6-7% on average.



August's IIP growth was revised to 6.92% from 5.6% estimated earlier. IIP had expanded by an impressive 15.2% in July. Industrial output growth during the first six months of the current fiscal year (April-September 2010-11) stands at 10.2% versus 6.3% in the corresponding period of the last financial year.

The IIP General Index in September 2010 stood at 325.6 versus 312 in the same month last year. August's IIP index was revised to 323.0 from a provisional estimate of 309.1. One has to keep in mind that the September 2010 IIP data is Quick Estimates and is therefore subject to a revision.

The Manufacturing sub-segment of the IIP grew by 4.5% in September 2010 versus 7.5% in the previous month while Mining output expanded by 5.3% versus 6.6% in August 2010. Electricity output for the month improved to 1.7% versus 1% in the previous month.

G-20 stresses on market determined exchange rates

The world's 20 leading economies or the so-called Group of 20 (G-20) pledged to move towards a market-determined foreign exchange regime besides warning against protectionist measures like unilateral currency intervention. The G-20 leaders also vowed to develop indicators to measure economic imbalances, but delayed until next year the contentious task of clearing defining the problem areas to be addressed.

Issued at the end of the Seoul summit of G-20 leaders, the communiqué said, "The bloc would focus on moving toward more market-determined exchange rate systems, enhancing exchange-rate flexibility to reflect underlying economic fundamentals. This is in line with a statement finance ministers from the G-20 issued in late October during their meeting in Gyeongju, South Korea.

The G-20 statement also said that its members will refrain from competitive devaluation, - a reiteration of the language used in the meeting of the world's top finance ministers and central bankers last month. As expected, the statement also laid out a plan to even out nations’ current accounts, but stopped short of announcing the details.

The statement called for "reducing excessive imbalances and maintaining current account imbalances at sustainable levels," and called on the IMF to help develop indicative guidelines toward this goal. However, the communiqué didn’t elaborate on how such guidelines would be enforced.

The guidelines would compose of a range of indicators to serve as a mechanism to facilitate timely identification of large imbalances that require preventive and corrective actions to be taken, it said.

The statement said the proposed guidelines would be discussed by G-20 finance ministers and central bankers in the first half of 2011, with the first assessment to take place in due course next year. The G-20 leaders targeted the 2011 leaders' summit late next year to develop an imbalance assessment. The IMF will help the G-20's working group on imbalances conduct the assessment, and the fund's surveillance will include exchange-rate policies.