IN: Industrial Production

Tue Jun 12 07:00:00 CDT 2018

Consensus Actual Previous
Change Y/Y 5.2% 4.9% 4.4%

India's industrial production index advanced 4.9 percent on the year in April, strengthening from 4.4 percent in March but falling short of the consensus forecast of 5.2 percent. This is in line with PMI survey data that also indicated that growth picked up in the manufacturing sector in April. More recent PMI data released earlier this month suggest, however, that conditions may have weakened modestly in May.

Stronger headline year-on-year growth was mainly driven by manufacturing output, which accounts for almost 78 percent of the total index. This grew by 5.2 percent on the year in March, up from 4.7 percent growth March, while electricity output, around 8 percent of the index, grew 4.9 percent on the year, up from 4.6 percent previously. Mining output, which accounts for around 14 percent of the index, also recorded stronger year-on-year growth.

Officials at the Reserve Bank of India remained confident about the growth outlook at their policy review held last week, reflecting their assessment that consumer spending, business investment and exports growth are likely to strengthen. They forecast economic growth to pick up from an estimated 6.7 percent last fiscal year to 7.4 percent in the current 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.