September IIP at 2% versus 0.43% in August

NEW DELHI: The Index of Industrial Production (IIP) for the month of September grew at below market-expectation levels of 2% versus 0.43% in August. An ET Now poll estimated that the IIP grew at 3.6%. Consensus estimate for the same ranged from 1.3% to 5.8%. The IIP for the April-September period now stands at 0.4%.

While the mining sector output exhibited a growth of 3.3% versus (-) 0. 2% in August, the manufacturing sector grew at 0.6% versus (-)0.1% in August. The basic goods sector saw a growth of 5.4% versus 1.5% in August.

The capital goods output contracted at (-) 6.8% versus (-) 2% in August. The electricity sector output grew at a robust 12.9% versus 7.2% in August.

Over the years, the government and analysts are seeing India's growth story to return to 8%. Apart from the stellar Q2 results, other domestic data so far has also been on the good side.

Trade deficit figure for the month of October, released yesterday, stood at $10.56 billion, as against $6.7 billion in the previous month. The number is about 50% seen in October 2013, and that was the highlighting point.

The latest reading of the country's services sector for October was higher than seen in the previous month. The HSBC Purchasing Managers' Index (PMI) for services saw a reading of 47.1 points in October, fourth consecutive month of contraction, but higher than the four-and-a-half year low of 44.6 in September.

A reading of 50 separates growth from contraction.

Infrastructure output data, released late last month, for September, was robust. Output rose an annual 8%, accelerating from the previous month's 3.7%.

"The core sector number had been quite decent ... On the other side, exports are doing relatively better," says Siddhartha Sanyal, Chief India Economist, Barclays Bank.

The bogey of rising current account deficit has somewhat been taken care of, largely due to the projections made by brokerages and the government. The current account deficit is now seen at around $45 billion for the current financial year, against the previous estimate of $70 billion. The new figure is supported from Standard Chartered as well as the government.

"In fact it (the CAD situation) has already improved. The fiscal Q3 current account deficit number will be very close to balance, and could be a small surplus," says Robert Prior-Wandesforde, Head of ASEAN, India Economics, Credit Suisse.