India's industrial production dipped 2.2% in June

Here's what to blame.

According to BBVA Research, India's industrial production growth, reported late yesterday, declined for a second straight month in June by -2.2% y/y (consensus: -1.1%) from a downwardly revised -2.8% in May, led by a contraction in mining and manufacturing activity.

Here's more:

On a three month moving average basis, the June IIP (-1.0% y/y) posted its sharpest dip since June 2009 as tighter funding conditions, a weakening currency, and retail inflation (9.6% CPI inflation in July) dampened business and consumer sentiment.

Looking ahead, however, we expect the closely watched July WPI inflation, due tomorrow, to remain relatively soft (BBVA: 5.2% y/y; consensus: 5.0%). With most high frequency indicators trending lower, risks to our 5.7% growth projection for 2013 are skewed to the downside.

Meanwhile, India’s Finance Minister yesterday outlined a new set of measures to contain the current account deficit and boost capital inflows, and help stem downward pressure on the currency.