India's index of industrial production rose 3.8 percent on the year in December, accelerating from growth of 2.4 percent in November. Within the industrial sector, manufacturing output advanced 3.9 percent on the year after an increase of 1.2 percent previously. In contrast, more timely PMI survey data indicate that growth in the manufacturing sector slowed in December before strengthening sharply in January.

The Reserve Bank of India again left policy rates on hold at 6.50 percent at their most recent meeting held last week. Officials noted that domestic economic activity is"holding up well" and advised that they expect growth to remain supported by investment demand and strong business and consumer sentiment. Today's data showing stronger growth in industrial production suggests upside risks to the inflation outlook will remain the RBI's primary concern in upcoming policy meetings.

Year-over-year industrial production growth is expected to rise to 2.6 percent in December versus 2.4 percent growth in October that slowed sharply from September's 11.7 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.