INSTANT VIEW 2-India's June industrial output up 7.8 pct y/y
NEW DELHI, Aug 12 (Reuters) - India's industrial output INIP=ECI rose by a much faster-than-expected 7.8 percent in June from a year earlier, data showed on Wednesday, driven by higher demand for goods such as cars and increased mining activity.
The figure was higher than a forecast for an annual rise of 3.3 percent in a Reuters poll of economists. ------------------------------------------------------------ KEY POINTS INDUSTRIAL OUTPUT: June 2009 June 2008 Annual growth in pct: +7.8 +5.4 Consumer goods +4.0 +9.9 Consumer durables +15.5 +4.6 Consumer non-durables +0.3 +11.6 Capital goods +11.8 +7.8 Mining +15.4 +0.1 Electricity +8.0 +2.6 ------------------------------------------------------------
- Manufacturing production INMFG=ECI rose 7.3 percent in June from a year earlier.
- May's annual growth rate was revised down to 2.2 percent from 2.7 percent previously.
- Industrial output rose 2.6 percent in the 2008/09 fiscal year (April-March), down from 8.5 percent in 2007/08.
MONTEK SINGH AHLUWALIA, DEPUTY CHAIRMAN, PLANNING COMMISSION, NEW DELHI:
"I always expect the positive trend (in industrial output) to continue."
"Government is aware that there is some moderation but let me say 6 percent growth in a year of slump, I mean weak monsoon, is a remarkable example of resilience of the economy."
ATSI SHETH, CHIEF ECONOMIST, RELIANCE EQUITIES, MUMBAI:
"The capital goods number has surprised us.
"However, we are not sure 7.8 percent is sustainable given that the drought is likely to dampen consumption and delay investment."
J.MOSES HARDING, HEAD OF GLOBAL MARKETS, INDUSIND BANK, MUMBAI:
"The impact of stimulus is built in, but the future is not so good due to various circumstances -- poor monsoon, swine flu etc. There are too many negative cues and a few positive cues."
GUNJAN GULATI, ECONOMIST, JP MORGAN CHASE, MUMBAI:
"The performance of mining sector, a key driver of this month's strength, however, could get impacted in next two months given the onset of seasonal rainfall.
"Having said that, it is too early to derive significant conclusions about the pace of recovery. We still continue to see mixed signals on the economic activity, as the bank credit demand remains weak while non-oil imports also remain sluggish.
"On the policy stance, we need to see continued and sustained strength in these economic indicators for the central bank to begin normalizing their policy stance."
ANAND RATHI FINANCIAL SERVICES, MUMBAI:
"The number far exceeds expectations, partly due to a depressed base in June last year, but all the numbers are looking very good so it seems like the stimulus measures are boosting industrial production.
"This is especially credible as the external environment and thereby India's export demand remains extremely subdued.
"Going forward, we see industrial growth picking up pace but for the current fiscal year as a whole, our target is that industrial production growth will be around 5.5 percent and current trends are in line with this forecast."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"Though the deficient monsoon has created an uncertainty about the overall growth outlook, the industrial buoyancy at this pace is definitely a strong positive signal. This means that India is going to attract strong private capital inflows and this augurs well for both the capital as well as the credit markets.
"At this stage it is difficult to say whether or not this is a one-off number. But until May the growth was partly contributed by the election-related spending but such a good number for June means that the average industrial growth for the year as a whole in the range of 6.5 percent to 7 percent looks feasible."
DEEPALI BHARGAVA, ECONOMIST, ING VYSYA BANK, MUMBAI:
"Capital goods have come as a positive surprise and have rebounded strongly. The numbers will likely be on the higher side in the next quarter."
A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI:
"The numbers are clearly a surprise. It might be because some sectors such as coal may have benefited due to the poor monsoons so to that extent it would be a one-off case and I would advise some caution in reading too much into the headline numbers.
"But it looks industrial output is being driven by strong domestic demand though the poor monsoons may have a restraining impact. But this shows recovery is well underway."
- The partially convertible rupee INR=IN bounced off the day's lows and was at 48.29/30 per dollar from 48.32/33 before the data. It had closed at 47.97/98 on Tuesday.
- The 10-year bond yield IN060519AG=CC edged up 3 basis points to 7.03 percent, the same level that it had ended at on Tuesday.
- The 30-share BSE index .BSESN trimmed losses of more than 2 percent immediately after the factory output data.
LINKS: Ministry of Statistics and Programme Implementation website www.mospi.nic.in
- The central bank said last month economic growth during 2009/10 (April/March) could be 6 percent with an upward bias.
- The central bank left key policy rates unchanged to help the economy recover faster.
- More than a quarter of India's districts are facing drought like situation and crop sowing was down 20 percent on year, which could dampen rural demand for consumer goods.
- The Indian economy grew 6.7 percent in 2008/09 (April/March), its slowest pace in six years.
- A survey showed manufacturing activity expanded for a third straight month in June, albeit at a slightly slower pace, reflecting strong local demand but exports fell for the eighth straight month.
- The budget for 2009/10 offered tax breaks industrial units, natural gas projects and stepped up spending for infrastructure.
- Since October, the central bank has cut its key lending rate by 425 basis points, and the government has slashed factory gate duties and service tax to protect growth and jobs. (Reporting by India Treasury team; Editing by Himani Sarkar)
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Prime Minister Narendra Modi has a long list of pro-growth measures to implement over the next four months, but time may have already run out to breathe enough life into the economy to meet the tough 2014/15 fiscal deficit target without cuts. Article