Encouraging signs for industrial growth in India: ANZ

NEW DELHI – In a review of India’s economic outlook ANZ says capital and consumer goods led a strong pick-up in April’s industrial production and that IP data is now heading in the right direction. “But we’ll have to wait for more signs before concluding that the slow pace of recovery is behind us – growth in key indicators such as cement and steel production remains near zero, and corporates aren’t exactly ebullient on investment prospects,” ANZ says.

“The lack of a downward surprise for inflation on the on the other hand confirms that the RBI is likely to stay on hold.”

ANZ says India’s April IP growth printed even stronger than the bank’s own above-consensus expectation at 4.1% y/y (consensus 1.5%, ANZ 2.5%), from an upward revised 2.5%. “Capital goods production looks surprisingly good at 11.1% y/y (8.7% March) and consumer goods also picked up to 3.1% y/y from -0.4%.”

But, ANZ adds, given that India’s statistics office itself admits to the product composition as being outdated, it is being careful about reading too much into monthly moves in IP. “The broad trend is encouraging however – after hovering around zero for a little over two years (2012-2013), IP growth has trended higher to average 3.6% over the last six months.”
 
ANZ says growth in ‘core’ industries such as steel and cement however is near zero to negative y/y – likely reflecting the still-struggling infrastructure sector. “Corporate results have also been weak. Hence it’s early to conclude that the slow pace of recovery will quickly change gear, even though improving IP growth is encouraging.” www.live.anz.com (ATI).