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Subdued industrial production may restrain overall growth: D&B

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Industrial production in the country is expected to remain subdued and this can act as a restrain to the overall growth momentum in the current fiscal, says a Dun & Bradstreet report.

Weak private sector investment and fragile external sector demand are likely to pull down industrial production in the coming months.

“Demand needs to revive strongly starting the festive month, especially from the rural segment, to support growth with government initiatives acting as a catalyst to boost both investment and consumption demand,” Dun & Bradstreet India Lead Economist Arun Singh said.

According to the report, while the IIP is expected to remain muted owing to the low investment and weak external demand, it is likely to edge on the positive zone supported by the festive season related demand and the favourable base effect.

D&B expects IIP to have grown by 0-0.5 per cent during September this year.
Further, business sentiment, as reflected in the Dun & Bradstreet Business Optimism Index, remained a tad cautious for the October-December 2016 quarter.

On prices, the report said that even as CPI inflation has moderated significantly in last two months and stood lowest in 13 months, the downward momentum in inflation is not yet broad based.

“The drop in inflation owing to a handful of commodities does not point to a sustained slowdown in the price levels, especially when core inflation has been strengthening,” Singh said.

As per the report, the upside risks to price still exist from the strengthening of the core inflation primarily owing to the inching up of the inflation in the services segment and the fuel group.

D&B expects CPI inflation to be in the range of 4.1-4.3 per cent and WPI inflation in the bracket of 3.5-3.7 per cent during October 2016, respectively.

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