India's industrial production to dip 0.6%

Signs are not encouraging, says analyst.

According to DBS, industrial production numbers (IP) for February are due today and a downward correction from January’s firm number is expected, with downside risks.

DBS' estimates suggest that on sequential basis February IP could have slowed to 0.4% (MoM, saar), which will translate into a decline -0.6% (YoY). 

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The earlier released core industries index also declined -2.4% YoY and a look at the sub-sectorsthat provide a good gauge ofinfrastructure and investmentrelated industries, the signs are not encouraging.

In addition, after expanding by over 25% during 2009-11 (partly making-up forsharp slump during the GFC), private sector capitalformation has slowed since, not helped by tightliquidity and soft demand-side conditions.

We expect this weakness to be reflected in the capital goods production, while consumer goods output provides some support. The PMI numbers for the month and auto sales have also signalled stabilisation in activity at low levels.

On the latter, data earlier this week showed that the automobile sector ended FY12/13 on a weak note, though a gradual revival could follow this year factoring in our base-case of a pick-up in consumption spending, though higher fuel costs will be a hindrance.

The other data of note today will be the March CPI inflation and our estimate is for a firm 11% (YoY) driven by increase in retail fuel prices and highly-weighed food price index.