India’s industrial activity rose slightly in January, with the index of industrial production growing by 3.5 percent compared with 3.2 percent in the previous month, indicating a slow turnaround for India’s manufacturing sector, according to a poll of 19 economists conducted by Moneycontrol between March 5 and March 7.
Industrial production growth is expected to stay below 4 percent for another month as manufacturing struggles to find its footing.
The disappointing performance follows from an easing of India’s core sector output, which expanded 4.6 percent in January following a 4.8 percent growth in the previous month.
India’s infrastructure industries have a 40 percent weight in the IIP.
Manufacturing activity has shown no signs of pickup in February either.
The HSBC India Manufacturing Purchasing Managers' Index dipped to a 14-month low of 56.3 in February from 57.7 in the previous month.
Manufacturing growth has remained muted despite the country's improving economic performance.
Even as the government expects growth to settle higher at 6.5 percent from 6.4 percent estimated earlier, manufacturing is likely to stay subpar, falling to 4.3 percent from 12.3 percent in the previous fiscal.
As a share of GDP, manufacturing dipped again to 15.7 percent from 16 percent average over the last decade and a half.
The MC poll forecasts for IIP growth ranged from 3 to 4.4 percent.
MC Economists’ Poll also pegged pegged inflation to fall to a six-month low of 3.82 percent in February.
The decline in inflation below RBI’s mid-point mark of 4 percent coupled with a fall in manufacturing, is expected to move the Monetary Policy Committee towards another 25 bps rate cut in the upcoming April meeting.
RBI MPC’s delivered its first cut after a hiatus of five years in February as it reduced the policy rate to 6.25 percent from 6.5 percent earlier.
A Moneycontrol poll conducted prior to the release of GDP data in February had predicted a rate cut in April with 77 percent probability.
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