MUMBAI: India's industrial output data is expected to remain robust and in double digits till mid-2010 on a robust purchasing managers index and benign base effect, economists said on Wednesday. "Capital goods production remained in double-digits at 12.2 per cent - supporting our view that the capex cycle has indeed turned despite the weakness of bank lending growth, typically a lagging indicator," HSBC said in a note.
India's industrial output rose at a faster-than-expected 11.7 per cent in November from a year earlier, helped by stimulus measures that boosted domestic demand, governemnt data showed on Tuesday. [ID:nDEL002550] The growth was mostly driven by a sharp rise in consumer durables production to 37.3 per cent in November from 0.3 per cent year ago.
"This is the strongest figure since November 1995, although it should be noted that durables only represent just over 5 per cent of the production index," HSBC note said. Manufacturing production rose 12.7 per cent in November from a rise of 2.7 per cent a year earlier.
ICICI Securities Primary Dealership said the revival in exports are likely to sustain, which may support the double digit rise in industrial output going ahead. Such consistent rebound in the industrial activity has strengthened faster monetary policy tightening measures by the Reserve Bank of India.
"This release (industrial output) together with the likelihood of a strong December wholesale price inflation number on Thursday seals India's near-term interest rate fate," the HSBC note said. HSBC maintains its expectation of a 50 basis points cash reserve ratio hike at the central bank's Jan. 29 policy.
Reacting to the strong output number, RBI Deputy Governor Subir Gokarn had said the revival in growth was skewed and patchy. "Consumer durables, which have been a huge driver in last few months is at 37 per cent. So, there is still an imbalance in pattern of growth. That is a consideration that will dominate our thinking," Gokarn said late on Tuesday.
Citigroup is also bullish on recovery in growth and raised its 20010/11 growth forecast to 8.4 per cent from 7.8 per cent earlier. It expects industrial growth in the 9-11 per cent range in the coming months, Citi said in a note.
Source: ReutersCourtesy economictimes.indiatimes.com
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