Industrial growth likely to pick up after worst show in 22 years

Likely to be up 3.1 per cent in FY15 says Religare, up from FY14 low of 0.4 per cent

The lowest industrial growth figures since the eighties is likely to help perk up figures for the financial year ending in the current quarter. 

The so-called base effect, where percentage gains are higher on account of lower figures in a previous period to which the current one is being compared, will help India's industrial growth numbers in FY15, according to a Religare Capital Markets report entitled 'Macro Junction.' 

"Industrial growth in FY14 was the lowest in 22 years, thanks to much weaker domestic and global demand. A marginal demand revival and low base should help support growth in FY15," said the report authored by Prerna Singhvi, dated 19th January. 

 

The figure for FY14 was 0.4 per cent, compared to one per cent for FY13. Religare believes this will rise to 3.1 per cent in FY15. 

Services are likely to only to marginally better, growing at 6.9 per cent this year compared to 6.8 per cent in FY14. Agriculture growth is likely to drop from 4.7 per cent to 2.5 per cent in the same period on account of the weak South West monsoon.

Another boost to industrial growth in the days ahead could also be lower cost of capital. Interest rates are likely to head lower in the next twelve months according to the report. 

According to the report, overall rates are likely to come down by 75-100bps over the next 12 months. Comfort on inflation, due to falling commodity prices, and the government's commitment to fiscal deficit targets underpin this preemptive measure.

The central bank now expects inflation to remain below 6% till Jan’16.