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April industrial output seen up 1.7 pc: Poll

Reuters
Jun 12, 2012 at 10:33am IST

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Bangalore: India's industrial output probably eked out a small rise in April over a year earlier of just 1.7 per cent after falling in March, a pace suggesting little pick up in the economy after a slump in growth at the start of the year.

In the first three months of calendar 2012 economic growth slumped to its weakest annual pace in nine years, sparking calls for policy action from both the government and the Reserve Bank of India (RBI).

Industrial output forecasts in a Reuters poll of 24 economists ranged from a fall of 1.5 per cent to a rise of 3.3 per cent. Four respondents predicted a fall.

April industrial output seen up 1.7 pc: Poll

January-to-March GDP figures showed that manufacturing shrank 0.3 per cent from a year earlier, the biggest drag on the quarter's growth.

Although March output slipped from a year earlier by 3.5 per cent, economists said the expected growth in April was too mild to indicate the economy's health was improving as the new quarter began.

"(Industrial output) growth rate has been very weak for a long time and I don't see any reason for it to be out of line with the almost zero growth rate we have seen in the last few months on average," said Andrew Kenningham, a senior economist at Capital Economics.

"There is nothing to indicate (GDP) growth is picking up in the second quarter after clocking the slowest rate in nine years."

Indeed, infrastructure sector output, covering major industries such as mining and utilities that account for about 38 per cent of industrial output, grew 2.2 per cent in April, the same pace as March. Four of its eight components in the infrastructure data fell.

So any pick up in industrial output in April probably reflected a low year-earlier comparison rather than fresh signs of growth, economists said.

The median is a far cry from the average growth of more than 9 per cent between December 2009 and June 2011 but is roughly in line with the findings of a purchasing managers' survey that showed India's factory sector picked up in April after two consecutive months of slowing growth.

"Two per cent can hardly be called stellar but it is some reversal after what looked like a slightly strange March number," said Robert Prior-Wandesforde, economist at Credit Suisse in Singapore.

"The infrastructure index was again quite soft but at the same time we know the base effect is very helpful for industrial production in April."

January-to-March GDP figures showed that manufacturing shrank 0.3 per cent from a year earlier, the biggest drag on the quarter's growth.

The government has blamed factors beyond its control, such as the euro zone debt crisis, for its economic woes. But corporate investment has slowed down as the government struggled for fresh initiatives on the economy.

Stubbornly high inflation, and high fiscal and trade deficits have led to comparisons with India's balance of payments crisis in 1991.

While the government has struggled for fresh policies to help boost the economy, the central bank is expected to cut its repo rate by 25 basis points to 7.75 per cent at a policy review on June 18, the consensus of a Reuters poll shows.

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