May IIP raises worry of slowing growth – Kotak

Reuters | Tue Jul 13, 2010 | 11:19am IST

The unexpected slowing of industrial growth in May has raised concerns on the severity of moderation in economic growth, Kotak Mahindra Bank said, adding that a month’s data may be insufficient to draw conclusions. Industrial output rose 11.5 percent in May from a year earlier, well below analysts’ forecast of a 16 percent rise and the revised 16.5 percent growth in April, data showed on Monday.

While some moderation was expected as a result of the withdrawal of stimulus measures, the extent of the slowdown was a surprise, Kotak economists Indranil Pan and Shubhra Mittal wrote. "We are keeping ourselves open to the risk of a larger than expected slowdown in industrial activity, especially as PMI Manufacturing fell in June," they said. "We now think that June could be the first month of a single digit print in industrial growth due to a strong unfavourable base effect in that month," they added.  

Indian manufacturing growth cooled in June after a surge in activity the prior month, mainly due to slowing production and rapidly easing input price pressures, a survey showed earlier this month. Kotak Mahindra Bank said it retains its view of the central bank continuing to normalize rates in a "calibrated" manner with an increase in policy rates by additional 50-75 basis points in the rest of this fiscal year including a move in the July 27 policy review.


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