"Expectations of moderation in industrial activity in the current year remain intact owing to the cumulative impact of monetary tightening and weaker external demand," JP Morgan said in a report.
India's industrial production grew 3 per cent in March against 14.8 per cent in the year-ago month.
Economists expect industry to grow at least 7 per cent in April 2008 helped by automobile and metal sales, but the increase may seem moderate compared with the 11.32 per cent jump in the measure in the corresponding month of the previous year.
"It looks like the IIP (index of industrial production) growth during April could be between 7 and 8 per cent. This is because of base effect as well as higher automobile sales during the month," said Saugata Bhattacharya, vice-president, Axis Bank.
The moderation in the industrial growth in the coming months may pull down the economic growth this financial year to less than its average 8 per cent growth of the past few years.
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"We expect gross domestic product growth to slow to 7.8 per cent in FY09 from 8.7 per cent in FY08," Goldman Sachs said in a report after the release of the industrial production data. Forecasters surveyed by the Reserve Bank of India expect real GDP in 2008-09 to be around 8.1 per cent which is weaker than it was three months ago.
The forecasters had assigned the highest 68 per cent probability to growth range of 8-8.9 per cent for the year 2006-07. For 2008-09, they assign 40 per cent probability to growth range of 7-7.9 per cent. In their forecast three months ago, they had assigned highest probability to growth range of 8-8.9 per cent.
Still, consumer goods companies expect sales to pick up in April aided by an income-tax slab restructuring in the Budget, helping to lift the industrial production growth.
"Growth is going strong and we see good demand in the coming months. The growth rate for April is going to be higher than the same month last year. We also expect higher growth rate in sales this quarter, said Adi Godrej, chairman, Godrej Group.
"Demand will be higher because of huge fiscal stimulus provided through new income-tax slabs and rates, the pumping in of more fiscal stimulus in the rural economy and announcement of arrears for government employees to be given later this year."
Companies such as Asian Paints said demand for their products remained "good" but were uncertain on the future growth.
"One will have to watch how the monsoons pan out to predict whether these demand conditions will remain throughout the year," said Ashwin Dani, vice-chairman & managing director, Asian Paints.