Latest data suggests that the Indian economy is showing clear signs of recover and is poised for a higher growth rate in Q4.
Moneycontrol’s Sakshi Batra discusses the January IIP and February CPI numbers and what it means for India’s economy going forward, with Gaurav Choudhury.
The Industrial Production index (IIP) expanded to 7.5 percent for the month of January from what was 7.1 percent in the month of December while the February Consumer Price Index (CPI) inflation came down to 4.4 percent.
Capital goods output also saw significant growth which could be an indication that investment activity seems to have picked up significantly compared to the end of 2016. The industrial sector seems to have shrugged off the decelerating effects of demonetisation and implementation of the Goods and Services Tax (GST).
The manufacturing activity grew at 8.7 percent versus 2.5 percent in January 2017, which could be a sign that the GDP growth could be closer to 8 percent by the end of 2018.
Gaurav Choudhury added that the IIP could touch double digits in the next two months.
Capital goods sector showed a growth of 14.6 percent in January versus a decline of 0.6 percent a year ago. This could be a sign that companies are selling goods at a faster rate. This could in turn lead to investments picking up at a similar pace.
Economy poised for healthy growth in Q4
Between January and March, economic growth could be around 7.2 to 7.5 percent, given the fact that India grew at 7.2 percent between October and December 2017. The government could also revise the GDP estimates upwards.
The exports remains an unknown as there is a competitive tariff war around the corner. The monsoon can have its effects on the manufacturing sector, which will have an impact on industrial demand and recover.
Vegetable prices, which shot up in the month of January to about 6 percent, came down to 4.4 percent.