REUTERS - India's industrial production rebounded more than expected in April to grow 3.4 percent over year-ago levels, after output had fallen in the previous two months, government data showed on Thursday.
Another set of data, which was also released on Thursday, showed the annual consumer price inflation eased to 8.28 percent in May, helped by slightly cooling food prices.
COMMENTARY
ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL, MUMBAI:
"There is some possible improvement in investment cycle going ahead on confidence building, which is marginally reflected in the data today. This kind of data will encourage the government to take steps to boost growth. Core inflation has remained stable, but we know monsoons will be a problem which could push up food inflation. Therefore, CPI inflation is still not at a comfortable level."
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI:
"I think it would be premature to call it a trend, though there is a marginal improvement in leading indicators also. For instance, going forward, the auto numbers may look a tad better. Overall, the leading indicator environment is getting more supportive. We expect the IIP (Index of Industrial Production) to improve.
"Going forward, we see improvement more pronounced in second half, with a hope that some of the obstacles on the investment side would be removed. We expect industrial growth around 3.5-3.7 percent for the year.
"As far as the CPI is concerned, I think what has been a surprise is, housing has corrected fairly dramatically month- on-month. Overall, all the momentum indicators on CPI also look comfortable. The key risk is, of course, on El Nino's impact on food (prices).
"I do not expect the RBI to take any action going forward in August. Our base case scenario is no action, we probably have peaked out in policy rates."
UPASNA BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI:
"Both IIP and CPI have pleasantly surprised. Production activity may get supported with robust export growth. Additionally, expediting stalled projects and improved business sentiments recently should act as a catalyst in reviving the capital expenditure cycle. Meanwhile, sticky core CPI inflation coupled with risk of deficient monsoons is likely to keep the RBI cautious, thereby maintaining a status quo on policy rates through 2014."
A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI:
"Underlying price pressures are slowing down, but persistent food price pressure is distorting headline inflation. So, government steps are required to bring down food inflation in line with slowdown in core inflation.
"Given that core inflation is easing means the Reserve Bank of India's monetary policy tightening is working with a lagged effect and so it can afford to be patient on interest rates.
"The IIP growth is led by mining and electricity and the government steps to facilitate mining and electricity output should continue to bear fruit. However, given the issues on data quality of IIP, it is difficult to say this recovery will sustain."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"Both the numbers are certainly encouraging. IIP growth is a tad higher than market expectations due to the usual bunching of capital goods growth. We have to normalise that and then see the data.
"All the components of IIP, including power generation, mining and manufacturing have started showing signs of improvement. Going forward, the pace of improvement will depend on the pace of structural reforms undertaken by the new government.
"Today's data points will not have any bearing on the Reserve Bank of India's (monetary policy) stance because the two critical factors which will determine the RBI's next move will be monsoon -- impact of which will be clear only in August/September -- and the Union Budget, which will give the RBI some indication of the government's fiscal consolidation plans."
BACKGROUND
- India's new government led by Narendra Modi is looking to revive the economy through higher investment in infrastructure, which it hopes will boost demand in sectors such as cement, steel and power.
- A Reuters poll showed wholesale price inflation rose to 5.4 percent in May, 0.2 percentage points higher than in April. The data is due on June 16 at 0630 GMT.
- Improving consumer sentiment helped car sales post their first annual growth in three months in May.
(Reporting by Mumbai treasury team; editing by Malini Menon)
