Economists to up GDP forecast post Sept IIP nos: Poll

The September industrial numbers at 9.1% is making the economist community sit up. CNBC-TV18's Vidhi Godiawala has polled a dozen experts and finds that several are now looking at a GDP rate closer to 7% than to 6% .

The September industrial growth of 9.1% didn't just beat economist's forecasts. It has made them wonder if they have underestimated the resilience of the economy and the speed of its recovery.  About 60% of economists polled by CNBC-TV18 said they have revised their industrial growth forecasts upward after the September numbers. About 40% are still waiting for November 30 when the agricultural GDP growth will be known.

Earlier 70% of the economists estimated the full year industrial growth at 7-8%, and only 10% put it at above 8%. After the September numbers, 60% say they expect industry to grow above 8% this year. In fact, 20% see a 9-10% growth rate.

Sonal Varma, Vice-President - India Economist, Nomura, says, "There may be some moderation on momentum on industry production side. If you look at some of the PMI indices, they have been flattish in recent months. So, they would suggest that the momentum is fading away. But I think we are at a much elevated level of industrial production already, which was initially led by consumer, now investmemnts and the supply side will also remain favourable overall."

Since industry accounts for about a quarter of the GDP, a 1.5 to 2 percentage point bump up industrial output leads to at least a half percentage point rise in GDP.  While about 50% of the economists polled were expecting GDP to grow, after the September IIP, half of them have revised their numbers upward. Currently, 70% of those polled expect GDP to grow by over 6.4%, 10% are even expecting it to be closer to 7%.

Yet, most economists are not changing their expectation from RBI. Most see any rate hike only by March. Only 20% see it in January.