Dispelling optimism about an economic recovery in twilight of present regime industrial production growth rate remained negative for the third month in a row, contracting 0.6 per cent in December 2013, mainly due to sluggishness in manufacturing sector.

Industrial output for the April-December period of the fiscal has contracted by 0.1 per cent, compared to growth of 0.7 per cent in the same period of 2012-13.

Manufacturing sector constitutes over 75 per cent of the index, declined by 1.6 per cent in December, as against a contraction of 0.8 per cent in the year-ago period.

During April-December, the sector's output contracted 0.6 per cent compared to a growth of 0.6 per cent in same period in 2012.

Consumer durables segment contracted by 16.2 per cent in December against decline of 8.1 per cent in the same month in 2012

For the April-December period, the segment declined by 12.9 per cent compared to a growth of 3.7 per cent in same period in 2012.

Coming close on heals of industrial data the inflation rates showed encouraging signs as it felt for the second consecutive month and eased to 24-month low of 8.79 per cent in January mainly due to a drop in food prices.

Inflation as measured by the Consumer Price Index (CPI) for December was 9.87 per cent down from 11.16 per cent in the previous month. WPI inflation is expected on Friday.

Ebbing inflation augurs well for the economy and enhancing chances of easing lending rates by RBI thereby creating liquidity. Construction, automobile and consumer durable sectors are heavily dependent on supply and demand side credit. Steel mills have been recurrently hiking prices over the past 2 months amidst flimsy demand would seek solace from expectancy of credit easing though it might come too little too late with parliamentary elections round the corner.

In India prior to election code of conduct is enforced by the Election Commission thereby stalling announcement of new projects. It is evident steel mills have been employing a short term price pilferage approach insulated by weak currency to maximize returns. However this moment of glory is in passing and reality will catch up sooner than expected. Mills might be coerced to roll back price levels next month lest face the daunting challenge from cheaper imports.