IIP at 6.8 percent: beats forecasts, markets surge

New Delhi:India’s industrial output rose a faster-than-expected 6.8 percent in January compared with a year earlier, government data showed on Monday.

Analysts had expected a rise of 2.1 percent, a Reuters poll showed. The January figure compares with December’s provisional increase of 1.8 percent.

Manufacturing output, which constitutes about 76 percent of industrial production, rose 8.5 percent from a year earlier, the statistics office said.

The data showed that industrial production expanded 4.0 percent between April 2011 and January 2012. Output grew 7.8 percent in the 2010/11 fiscal year that ended in March, below the 10.5 percent clocked the year before.

Ashok Gautam, senior VP of Axis bank said “This is much above people’s expectations, but I don’t think it will have an immediate impact on the RBI’s rate decision. The central bank is certainly going to wait for the budget and the government’s borrowing programme for the next year and what is going to be the (fiscal) deficit number. That is why we believe the rate decision will happen in April.”

“This must be overstating the economic recovery. The three-month (Novermber to January) average number at 4.9 percent captures the state of industrial demand better. But I don’t think this gives way to hope that there will be a significant recovery. Without any support from RBI on rates, growth will not pick up.” said A Prasanna of ICICI securities.

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C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (PMEAC) says that industrial production will improve further in the current quarter and overall growth rate too is very encouraging.

Reuters