India’s Industrial Production (IIP) has grown in April 2012 to 0.1%, way below market expectations of 1.08% growth. Manufacturing sector reported a marginal growth of 0.1% while mining sector witnessed a fall of 3.1%. Electricity sector registered a growth of 4.6%. The cumulative IIP growth for the period April-March 2011-12 stood at 2.8% over the corresponding period of the previous year.
Views from different experts on April IIP data:
Sonal Verma, Economist, Nomura:
“Uncertainty over global demand further clouds India’s growth outlook at this stage, the main problem being that slow growth has not yet translated into weaker inflation readings. We expect headline WPI inflation to inch higher in May (data due 14 June), mainly on rising food prices, though we expect core inflation, which is more demand-driven, to ease.
Today’s weak IP reading increases the likelihood of a 50bp rate cut to 35%, from our initial estimate of 20%. Our base case view is still a 25 bps repo rate cut on June 18 with no change in the cash reserve ratio, but we wait to see the WPI inflation print (June 14) before making a final call”.
Dr. Arun Singh, Sr Economist, D&B India:
“Industrial production growth continues to remain weak. The mining and the capital goods segment continue to be the laggards pulling down the overall IIP index growth. A revival in above two segments is imperative for the IIP growth to gain traction going forward. However, only a monetary stimulus in the form of repo rate or CRR cut will not be able to pull up the growth momentum of the industrial sector. The Government needs to take some strong actions to boost the investor sentiment without which the recovery in growth which was expected to happen during the current fiscal will be delayed”.
Dipen Shah, Head of Fundamental Research, Kotak Securities:
“A near-zero reading on IIP, along with the S&P downgrade warning has raised hopes that, the RBI will reduce interest rates to support growth. This led to a rise in the markets today. A reduction in crude price has also made the markets more hopeful. We believe that, the May inflation data as well as the developments in Greece over the next few days will influence the RBI’s decision to some extent. On the other hand, the rupee depreciation and the progress of monsoon may make the RBI wary as far as a reducing interest rate is concerned.
We maintain that, fiscal reforms and removing of procedural and administrative issues are the pre-requisites for the markets to move up in a sustained manner”.
Indranil Pan, Chief Economist, Kotak Mahindra Bank:
“Growth trends continue to stay weak, associated with a sharp drop in the capital goods growth. Thus, continuing worry remains on the investment growth but this is unlikely to revive soon, even with expectations that the RBI could be easing monetary policy further. Global demand conditions remain weak and domestic demand conditions are also not likely to revive very significantly in the immediate future. We think that the industrial production has mostly bottomed out, but the recovery will only be very slow and saucer-shaped. The second half of the FY could be expected to be better than the first half, as monetary easing percolates to the real sector of the economy and a base-effect from the previous fiscal helps a technical bounce. Based on our IIP trend into FY2013, we expect GDP to be at 6% for the year”.

Courtsey: myiris
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