Industrial activity barely grew (0.1% YoY) in April, against our expectation of 2.5%, largely reflecting a sharp contraction in capital goods. With this data, it is clear that uptick in activity seen during Nov2011-Feb2012 has not sustained. Investment slump is apparently leading the weakness in IIP, but consumer goods production is also gradually slowing on trend basis. More importantly, the forward looking intermediate goods also remain in contraction zone, foreshadowing continued weakness in overall industrial activity. Likely monetary easing by RBI in coming months could revive some business confidence. However, rate cuts have to be accompanied by government policy action, to bring about a turnaround in the investment cycle.
Regards,
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