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Analysts sound cautionary note on IIP numbers

New Delhi, Dec 12, 2012, DHNS :
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Beating analysts’ expectation, India's industrial production soared by 8.2 percent in October, 2012, compared to -5 per cent in October, 2011, though analysts said it’s too premature to see signs of recovery.

Though the overall rate for the period April-October 2012 is down at 1.2 per cent when compared to 3.6 per cent during the same period.

Analysts had expected a rise of 4.5 percent. Further, revised government figures released for September showed that there was a contraction of 0.7 per cent; the earlier estimate was 0.4 per cent.

Manufacturing, which constitutes about 76 percent of industrial production, rose 9.6 percent in October this year. Most experts conceded that industrial output grew at a better-than-expected rate of 8.2 per cent; the growth was aided by low base of last year and festival demand.

However, analysts sounded a cautionary note. CRISIL Research said, “ It is too early to believe that this type of buoyancy will sustain going forward. As the current industrial slowdown is both well entrenched and broad based, it will take a while for industrial growth to recover.” It expected industrial output growth to remain at muted levels during the remaining months of this fiscal.

Chief Economist at State Bank of India, Brinda Jagirdar said, “To a large extent, the uptick in industrial performance is optical, masking the reality, largely because of base effect. I don't think the RBI should be swayed by this number and should address the underlying weakness in the economy by cutting rates.”

The numbers may not be so encouraging for November, according to an economist at ICICI Securities, A Prasanna.“We should be careful in not over-interpreting this number. With some shifting of festivals in October and more number of working days, we should see some payback in November. Already, we saw the auto sale numbers, which were not encouraging.”

Angel Broking's Bhupali Gursale said, “Growth has been boosted by festival demand and an improvement in the core sector output. Going ahead, the high base for H2, FY2013 does not augur favourably for sustainable expansion but the October number is likely to push up overall growth in industrial production for the fiscal year. ”


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