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India – Economics (October IIP: Growth rebounds):
India’s October Industrial production growth of 10.8% in October was above our estimate of 8.3% and is a big jump from sub 7% IIP growth in the preceding two months. While acceleration in growth was expected due to seasonality (Festival season was later this year) and late withdrawal of monsoon which disrupted September output, the magnitude is a positive surprise. Given the recent volatility in IIP data, forecasting near-term trajectory has become tricky, however we expect IIP to average ~8.5-9% for the full year (FY11) implying a deceleration from the Ytd growth of 10.3%, largely due to base effect. With inflationary pressures rising due to the recent rise in commodity prices and still robust growth, we expect RBI to be on a ‘temporary’ pause in December and resume policy tightening from early next year.
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