Annual growth of industrial production picked up in June. It was up 3.8 percent on the year after slowing surprisingly sharply in May to 2.7 percent. The cumulative growth for the period April-June 2015-16 over the corresponding period of the previous year stands at 3.2 percent. Manufacturing was up 4.6 percent on the year with the cumulative growth in manufacturing up 3.6 percent during the April through June period.
Looking into July the manufacturing PMI increased to 5.27 from 51.3 was promising for future growth. With CPI inflation still comfortably below its 6 percent interim target mark, another reduction in interest rate by the RBI may not be too far away. However, the RBI's last cut was described by the central bank as front-end loading and key to any future move will be a continuation in July, a key period for crop planting, of the encouraging monsoon rainfall seen in June.
Industrial production index measures changes in the volume of production in the mining, manufacturing and electricity sectors. The data are not seasonally adjusted.
Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.
The index is a quantitative index with the production of the items being expressed in physical terms. The Index is compiled by taking into account the quantities of items produced during the current month, compared with the average monthly production in the base year. Selection of items is based on the total production of the items as the primary (main) product as well as secondary (by) product. Data are available monthly within six weeks of reference month.
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