Expert views - October industrial output jumps 8.2 pct, beats forecast

Last Updated: Wed, Dec 12, 2012 06:56 hrs

India's industrial production soared by 8.2 percent in October from a year earlier, government data showed.

Analysts polled by Reuters had expected a rise of 4.5 percent in October output. Revised government figures released on Wednesday showed September output growth was revised down to a contraction of 0.7 percent from a contraction of 0.4 percent.

Manufacturing, which constitutes about 76 percent of industrial production, rose by 9.6 percent in October from a year earlier, the federal statistics office said.

In the April-October period, industrial production expanded an annual 1.2 percent.



"To a large extent the uptick in industrial performance is optical, masking the reality, largely because of base effect. I don't expect this kind of buoyancy in manufacturing to sustain going forward as five industrial sectors are showing negative growth. I don't think the RBI (Reserve Bank of India) should be swayed by this number and should address the underlying weakness in the economy by cutting rates."


"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, and maybe that will reflect in the overall industrial production numbers for November.

"That said, there are enough signs of optimism. A lot of supply side issues that were there last year, seem to have gone away. In a sense, the IIP number that we saw in September showed a bottoming out, and we may see expansion month after month from here.

"If this kind of number sustains, then the situation on growth may not be alarming, in the sense there is going to be some recovery."


"We were expecting a seasonal recovery in the second half. Manufacturing and core sector growth have bottomed out but the slowdown in services continues. I stick to the fiscal year IIP growth target of 4.6 percent.

"However, with inflation likely at 7.8 percent in November, a rate cut is ruled out in December. I do not expect any CRR (cash reserve ratio) cut also as the government is maintaining large cash balances with the RBI."


- India has set a share sale in state miner NMDC Ltd for Wednesday, in a deal which sources said could add up to $1.1 billion to government efforts to ease its yawning budget deficit.

- The government has sought to spend an extra 308.4 billion rupees in the current fiscal year ending March 2013, as expected, to meet its upwardly revised fiscal deficit estimate though it assured there will be no extra borrowing.

- India's fragile ruling coalition won a vote last week on allowing foreign supermarkets to operate in Asia's third-largest economy, in a key test of support for Prime Minister Manmohan Singh and his flagship economic reform.

- Exports fell 4 percent to $22.3 billion in November, while imports jumped to $41.5 billion, leaving a trade deficit of $19.3 billion. Exports between April and November fell 6 percent to $189 billion.

- Inflation probably picked up in November to 7.60 percent as a weak currency pushed up the price of imported fuel, adding to the challenges facing a central bank torn between fighting rising prices and an economic slowdown, a Reuters poll showed. The data is due on Friday.

- The manufacturing sector beat the expectations of economists to grow at its fastest pace in five months in November, boosted by strong export orders and a surge in output, a business survey showed last week.

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