Instant View: May industrial output up 11.5 pct. y/y

Reuters | Mon Jul 12, 2010 | 11:23am IST

  • A car plant in Gujarat India’s industrial output in May rose at a slower-than-expected 11.5 percent from a year earlier, data showed on Monday.
  • Manufacturing production rose 12.3 percent in May from a year earlier.
  • April’s annual growth rate was revised downwards to 16.5 percent from 17.6 percent.
  • Industrial output rose 10.4 percent in the 2009/10 fiscal year (April-March), faster than an upwardly revised 2.8 percent in 2008/09.

Analysts’ Views

Rupa Rege Nitsure, Chief Economist, Bank of Baroda, Mumbai:

"The data is absolutely in line with my projection. I was expecting growth to cool off on a rapid rise in input costs. From next month onwards, high base effect too will moderate the growth momentum."

Deepali Bhargava, Economist, ING Vysya Bank, Mumbai:

"A moderation in IIP is as per our expectations. Though we were looking for a number closer to 13.5 percent, a bigger moderation may reflect rising cost pressures both for consumer durables and capital goods industry. We expect WPI inflation to breach 11 percent in June, hence I stick with the 25 basis points rate hike call."

Sonal Varma, Economist, Nomura, Mumbai:

"The next few months we are likely to see a much weaker IIP growth numbers as the base effect is adverse and I think a part of the inventory restocking phase is coming to an end and the production is normalizing now. I think 

25 basis points rise in the July 27 policy looks likely. Although it (IIP data) is below expectations, it’s still a decent number. I don’t think policy expectations will change much as inflation is still a concern.”

Saugata Bhattacharya, Economist, Axis Bank, Mumbai:

"These are really blips. The number is disappointing but we don’t think monetary policy should respond to these volatilities and be more attuned to the trajectory of interest rates. This definitely needs a closer analysis as to where the slowdown is coming from."

Market Reaction:

  • The partially convertible rupee eased to 46.70/71 per dollar, from 46.66/67 just before the factory data. It had closed at 46.66/67 on Friday.
  • The 10-year bond yield edged lower to 7.61 percent from 7.63 percent beforehand. It had closed at 7.65 percent in the previous session.
  • The one-year swap rate was down 3 basis points at 5.70 percent.
  • The 30-share BSE index trimmed gains to be up 0.5 percent. It was trading up 0.85 percent before the data.

Link: Ministry of Statistics and Programme Implementation website


  • The government expects the economy to grow 8.5 percent in the current fiscal year that started on April 1, after expanding 7.4 percent in the previous year.
  • Robust growth has raised the prospects of capacity constraints, which are seen aggravating price pressures.
  • Official data last month showed the wholesale price index rose an annual 10.16 percent in May.
  • In June, the government freed up state-subsidised petrol prices and raised the prices of other fuels — moves that could push up headline inflation by around one percentage point. The June data is due on Wednesday.
  • The government had revised March’s inflation to 11.04 percent from an earlier estimate of 9.90 percent.
  • The Reserve Bank of India (RBI) is widely expected to raise rates by another 25 basis points at its monetary policy review on July 27, after it surprised markets early this month by raising policy rates by a quarter points.
  • The RBI had raised rates by 25 basis points each in March and in April.

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