Preview: industrial production up 2.8%

India industrial production

Infrastructure output or core output, which makes up nearly 38 percent of industrial production, grew 5.1 percent year-over-year in September, stronger than 2.3 percent in August, government data showed last week.

That index measures the output at eight of India's key infrastructure industries and is widely regarded as a precursor to the IIP data.

Of those eight, economists predict that strong performances by mining, manufacturing and cement will hold up the headline industrial production growth rate at levels similar to August.

Some expect industrial production to benefit, in coming months, from an improvement in domestic demand which has been bogged down by still-relatively high interest rates and rising food and fuel prices.

On the demand side there are some tentative signs that the industrial slowdown may have bottomed out, said A. Prasanna, economist at ICICI Securities Primary Dealership, who expects industrial production grew an annual 3.4 percent in September.

While the worst might be over for India's economic growth, the recovery will be gradual from that is expected to be the weakest fiscal year expansion in a decade.

But it is far from clear whether manufacturing has passed its weakest point.

The HSBC manufacturing purchasing managers' index (PMI) inched up in October from September's 10-month low as new orders picked up, but provisional government data showed exports fell 11 percent in September from a year earlier.

If you look at some of the other indicators, the export figures and the business surveys, they are not pointing to any underlying improvement in the situation, said Andrew Kenningham, economist at Capital Economics.

India will probably miss its revised fiscal deficit target for the fiscal year ending in March, casting doubt over the country's efforts to avert a credit rating downgrade, a separate Reuters poll showed on Wednesday.

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