, India

India's industrial production predicted to hit 1.1%

But growth momentum likely halted.

According to DBS, the headline IP could register 1.1% (YoY) rise from 0.6% the month before.

On sequential basis, however, the momentum likely decelerated from the 1.8% MoM rise in the prior two months.

Here's more from DBS:

While a sharp increase in the volatile capital goods production was the source of modestly firm February number, we expect a slight pickup in the output from supply-oriented industries to support the headline in March.

The latter was reflected in the core industries growth which rose 2.9% YoY in March, springing out of a negative number the month before.

A look at the sub-components showed that save for natural gas output which has contracted for over two years, all the other industries noted increase in production.

This is encouraging as these sectors are representative of investment-related activities. However, we are sceptical on its sustainability as most other lead indicators point towards still weak capital formation and investment trends.

Nonetheless, with the central bank expected to lower benchmark rates further and increased government spending to partly ease the tight liquidity conditions, we maintain a positive view on the cost of funds.

An outcome close to our expectations will take the average industrial production growth to 0.9% in FY12/13, decelerating from 4.9% rise in the prior four years. Weak external and domestic demand conditions will also deter manufacturers’ from building-up capacity and inventories.

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