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Apr 12, 2013, 06.07 PM IST | Source: Moneycontrol.com

Feb IIP grows at 0.6%: What it means for economy?

Index of Industrial Production (IIP) for the month of February surprised the street with 0.6 percent growth versus expectations of a 1.7 percent contraction. Some experts believe that growth in exports has played a positive role but warn that it is not a very strong and sustainable recovery.

Index of Industrial Production (IIP) for the month of February surprised the street with 0.6 percent growth versus expectations of a 1.7 percent contraction. Some experts believe that growth in exports has played a positive role but warn that it is not a very strong and sustainable recovery

So, here are what experts view what February IIP means for the economy?

Samiran Chakrabarty, Head - Regional Research (South Asia), Standard Chartered

The numbers say that the capital goods, which is a very volatile component is one of the bigger factors in driving growth. I would go with about 2-3% average IIP growth for the quarter. We did a survey of a few corporates a couple of weeks back; it did not show up any trend of capex activity picking up among those corporates. It could be that it is the smaller corporates where there is some capex activity happening. I would want some confirmation for another couple of months before saying that there is a capex recovery on the way.

Jyotinder Kaur, HDFC Bank

We are stuck in this trap of weak growth and we don't seem to be making too much headway beyond that. We remain somewhat circumspect about the extent of capex that we could see and we will pencil in a number of 5.6 percent GDP growth for FY14. Our own capacity utilization indicators suggest that the capacity utilization levels actually fell in Q4. And what we could be having is the typical bunching up of data that we see that is typical of capital goods series.

Robert Prior-Wandesforde, Credit Suisse

Fundamentally, it seems to me that there are good reasons to believe that recovery is going to come through and that will involve investments. Cash realisation is not a lead indicator of capital spending. Interest rates have come down, the exchange rates have depreciated, exports are starting to recover and we have some good news relative to expectations on reform. So, there are a few bits and pieces out there, which I think will drive recovery.

Tushar Poddar, Managing Director and Chief India Economist, Goldman Sachs

The upside surprise was mainly led by an uptick in the capital goods segment, which jumped 9.5 percent y-o-y. Sequential momentum was also strong in the capital goods index.  While activity remains weak, the better-than-expected reading today supports our view of a gradual uptick in activity and the appearance of "green shoots" in the data. We continue to expect a cyclical recovery in activity, becoming more pronounced in 2H2013. We maintain above-consensus view of FY14 GDP forecast at 6.4 percent y-o-y.

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