IN: Industrial Production

Thu Oct 12 07:00:00 CDT 2017

Actual Previous Revised
Change Y/Y 4.3% 1.2% 0.9%

India's industrial production index rose 4.3 percent on the year in August, accelerating from an increase of 0.9 percent in July. This increase is consistent with recent PMI data which also suggested that industrial activity rebounded in August from the initial impact of the government's new goods and services tax, introduced at the start of July

The increase in the headline index was mainly driven by manufacturing output, which accounts for almost 78 percent of the total index and which rose by 3.1 percent on the year in August after an increase of just 0.1 percent in July. Stronger growth was also recorded in electricity output, up 8.3 percent on the year compared to 6.5 percent in July, and mining output, up 9.4 percent compared to 4.8 percent. Output rose on the year in ten of the twenty-three industry groups covered in the survey.

PMI data released earlier in the month suggests industrial production growth may stabilise in September, with the manufacturing survey's headline index unchanged that month. At its most recent policy meeting, held last week, officials at the Reserve Bank of India revised down their forecast for economic growth in the current fiscal year from 7.3 percent to 6.7 percent, citing the initial impact of the new goods and services tax on the manufacturing sector and its potential to weigh on business investment.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are not seasonally adjusted and the main is on the annual growth rate of total industrial production and, within that, manufacturing output. The report is usually released around six weeks after the end of the reference month.

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.