SENSEX NIFTY
May 10, 2012, 08.03 AM IST | Source: Reuters

March industrial output seen slowing further: Reuters Poll

India's industrial output grew at a sharply slower pace in March thanks to a cooling infrastructure sector, a Reuters poll showed, underscoring the wider economic gloom in the country.

March industrial output seen slowing further: Reuters Poll

India's industrial output grew at a sharply slower pace in March thanks to a cooling infrastructure sector, a Reuters poll showed, underscoring the wider economic gloom in the country.

A survey of 28 economists showed industrial production (IIP) likely rose around 1.5% year-on-year in March, significantly lower than February's 4.1%.

That would be in line with the findings of a purchasing managers' survey that showed India's factory sector expansion slowed for the third consecutive month in March.

Infrastructure sector output, a core component of the wider industrial output, grew by a meager 2% in March, much less than the 6.9% in the previous month.

The sector accounts for around 38% of overall industrial output and trends in infrastructure data are typically reflected in the headline number.

"The core sector data shows that there has been a substantial slowdown in quite a few important segments of industries," said Madan Sabnavis, chief economist at CARE Ratings, forecasting IIP at 2.7%.

India's economy, once a key driver of growth in Asia, has slowed considerably due to surging inflationary pressures, which have resulted in high interest rates.

A sustained pick-up in industrial output is not yet in sight, economists say.

"The growth of industrial production is likely to remain highly dampened going ahead, led by slack in investment activity owing to the elevated interest rates," said Arun Singh, senior economist at Dun & Bradstreet.

His views were similar to those of CARE Ratings' Sabnavis, who is not expecting IIP to cross the 3.5% mark for the year.

Growth prospects for the Indian economy have been consistently downgraded. Economists polled by Reuters cut their gross domestic product forecasts for the fifth straight quarterly poll in April.

Annual exports fell in March for the first time in four months as demand from key trade partners, Europe and the United States, weakened.

However, there are a few bright spots in the faltering Indian growth story that might boost the industrial output number ahead.

An uptick in both the manufacturing and services purchasing managers' index numbers for April offers room for optimism. So does the surprisingly sharp rate cut by the central bank at its April meeting in an effort to boost the slowing economy.

"Overall, we do see some improvement (in IIP) going forward but it will not be a very sharp reversal," said ING Vysya economist, Upasna Bhardwaj, who is forecasting IIP growth of 2.8% for March.

"The policy inertia that has set in, there has to be some movement on that front as well to really see a substantial improvement in industrial activity."

ADS BY GOOGLE

video of the day

No definite plans for merger of PSU banks: Banking Secy

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.