IIP growth seen at weak 1.8%, outlook bleak

Industrial production is expected to have risen by a weak 1.8 percent in March 2012 compared to 4.1% in Feburary 2012, according to an ET Now poll. Experts expect the FY12 IIP to grow 3.5-4 percent.

Mining output in March likely grew at 1.2 percent compared to 2.1 percent in February 2012. Manufacturing likely grew at 1.8 percent and electricity at 2.3 percent compared to 4 percent and 8 percent, respectively, in February 2012.

The infrastructure index of eight core industries grew at modest pace of 2 percent in March 2012 versus 6.8 percent in February 2012 and 6.5 percent in March 2011. This index has 37.9 percent weight in IIP index.

Future Outlook

The IIP is likely to remain weak in the near term with economists expecting FY13 at about 6.5 percent to 7 percent, the poll showed. The investment cycle is expected to remain sluggish in the near term on lingering concerns of rupee depreciation, oil prices and inflation.

A turnaround in the business cycle will only happen with a combined effort on policy action, interest rate cuts, which are ruled out in the near term, easing liquidity situation and easing of global oil and commodities prices, experts said.

The HSBC Manufacturing PMI improved modestly to 54.9 in April up from 54.7 in March.