IN: Industrial Production

Fri May 11 07:00:00 CDT 2018

Actual Previous Revised
Change Y/Y 4.4% 7.1% 7.0%

India's industrial production index advanced 4.4 percent in March, slowing from 7.0 percent on the year in February. This is the weakest growth since October 2017 and is broadly in line with PMI survey data that also indicated that growth slowed in the manufacturing sector in March. More recent PMI data released earlier this month suggest, however, that conditions may have improved in April.

The drop in headline year-on-year growth was entirely driven by manufacturing output, which accounts for almost 78 percent of the total index. This grew by 4.4 percent on the year in March, well down on the 8.7 percent growth recorded in February and also the weakest growth seen since last October. Conditions improved elsewhere. Mining output, which accounts for around 14 percent of the index, advanced 2.9 percent on the year, rebounding from a drop of 0.4 percent in February, while year-on-year growth in electricity output around 8 percent of the index, picked up from 4.5 percent to 5.9 percent.

Despite this slowdown in manufacturing growth in March, officials at the Reserve Bank of India were confident about the growth outlook at their policy review held last month, citing their view that business investment and exports growth is likely to strengthen. They forecast economic growth to pick up from an estimated 6.6 percent in the fiscal year just ended to 7.4 percent in the new fiscal year, up from a previous forecast of 7.2 percent.

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.