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February industrial production continued to signal the on-going weakness in investment
activity - capital goods production fell 18.4% yoy - though unfavourable base effects
undoubtedly played a role, the meagre 1.6% mom increase is indicative of the weak
investment climate. This weakness suppressed growth overall industrial production to 3.6%
yoy and manufacturing to 3.5% yoy. Though similar to January's performance, this pace of
increase in industrial production is an unusually weak in the Indian context.
Consumption based production however, remains firm. Output of consumer durables and
non-durables increased 23.4% yoy and 6.1% yoy respectively. The data is consistent with
other consumption indicators like auto sales and currency held by the public.
Overall, it is becoming clear that the on-going policy drift with regards to infrastructure related
projects is starting to bite into the country's investment cycle and overall growth. The slowing
investment activity also poses a challenge for monetary policy considering that it is coming at
a time when inflation is still above the official target of 8%. Nonetheless, going by recent
statement from central bank officials, it appears that inflation management will remain the
key policy objective. We continue to forecast another 75bps (cumulative) of rate hikes during
the course of the year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
February industrial production continued to signal the on-going weakness in investment
activity - capital goods production fell 18.4% yoy - though unfavourable base effects
undoubtedly played a role, the meagre 1.6% mom increase is indicative of the weak
investment climate. This weakness suppressed growth overall industrial production to 3.6%
yoy and manufacturing to 3.5% yoy. Though similar to January's performance, this pace of
increase in industrial production is an unusually weak in the Indian context.
Consumption based production however, remains firm. Output of consumer durables and
non-durables increased 23.4% yoy and 6.1% yoy respectively. The data is consistent with
other consumption indicators like auto sales and currency held by the public.
Overall, it is becoming clear that the on-going policy drift with regards to infrastructure related
projects is starting to bite into the country's investment cycle and overall growth. The slowing
investment activity also poses a challenge for monetary policy considering that it is coming at
a time when inflation is still above the official target of 8%. Nonetheless, going by recent
statement from central bank officials, it appears that inflation management will remain the
key policy objective. We continue to forecast another 75bps (cumulative) of rate hikes during
the course of the year.
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