India's IIP (index of industrial production) slump likely over, growth up in Dec: Economists

IIP

The worst is probably over for flagging Indian factories but production was likely subdued in December as global demand remained weak.

India's index industrial production (IIP), which includes output at factories, mines and utilities, likely rose an annual 1.1 percent in December after shrinking 0.1 percent in November, according to the poll of 24 economists conducted this week.

If realised, that would show factory output grew in just six months of last year but economists said Indian manufacturers were expected to fare better this year.

"The fall in industrial production has bottomed out in the final months of 2012 but will not pick up at a sharp rate, it will only be a very gradual recovery," said Aman Mohunta, an economist at Nomura.

Output in the country's eight key infrastructure industries , which account for almost 40 percent of factory production, expanded just 2.6 percent in December from a year earlier, a tad higher than November's 1.6 percent.

And output in three of those eight key industries - natural gas, coal and fertilisers - contracted, which likely had a bearing on overall industrial production.

Factory output has also been hurt by relatively weak global trade, especially from Europe, India's largest trade partner, with the debt-ravaged euro zone economy expected to contract again this year.

"We are not seeing a broad based improvement in exports for IIP to reflect that," said Upasna Bhardwaj, an economist at ING Vysya Bank.

Exports, which account for one-fifth of India's gross domestic product, fell for eight consecutive months up to November but December trade data showed the pace of contraction was slowing.

Asia's third-largest economy is headed for even worse than anticipated growth this fiscal year ending in March, well below the earlier projections for a decade low pace, according to preliminary data released on Thursday.

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