IIP contraction a fallout of demonetisation: FM

New Delhi: Finance Minister Arun Jaitley on Friday said contraction in industrial production in December was on account of the fallout of demonetisation and expansion was expected in the coming months.

"November and December (IIP figure) cannot be the representative of period of this year. This is the demonetisation period and compared to November, December was more challenging for the reason that in many areas old currency was allowed to operate. In December it had gone away," he said.

Therefore, he said, "what was available in December was that the remonetisation was still at initial stages. At the same time an integration of informal with formal and formal the just began to expand. I think in the subsequent months, you probably would see a greater indication of expansion of the formal economy".

Industrial production contracted to four-month low of 0.4 percent in December with consumer durables output plummeting by over 10 percent and an overall decline in manufacturing.

IIP in November had however grown by 5.7 percent compared to a contraction of 3.4 percent in the same month a year ago.

With regard to rate of price rise, he said core inflation is being monitored.

"We would like it to remain certainly in 4 percent figure. I personally believe it would remain in that there is no indications of any significant rise in commodity prices... but this is one area where you always keep your fingers crossed," Jaitley told CNBC TV18.

He further said the wish list of any Finance Minister is lower interest rate so that growth could be pushed.

"Finance would always like lowering of rates. The logic really being if you have inflation below 4 percent, you would always want more lending more credit more economic activity. That's a wish list. That's a permanent wish list beyond that I think we have entrusted this to the wisdom of a particular group (MPC) we must except their judgement," he said.

On setting up of Public Sector Asset Rehabilitation Agency (PARA), Jaitley said, there are already vibrant asset reconstruction companies and the government wants to try them.

"I don't moving immediately in any direction," he said when asked if there is plan for it.

Talking about bank consolidation, he said, it is very much on the table and there is lot of movement on SBI front.

Consolidation in SBI will help it become a global size bank, he added.