IIP disappointing

Industrial production rose much less than expected in August, dimming festive spirits after a series of positive data releases had raised hopes that the Indian economy was on the mend and fighting talk from the country’s finance minister that he sees prospects for revival this year.
Factory output as measured by the Index of Industrial Production (IIP) rose just 0.6% in August against 2.75% in July, itself revised upward from 2.6%, the Central Statistical Organisation said.
The consensus estimate was for a 2% rise in August on the back of a 13% increase in exports and a 3.7% expansion in the output of the core sector, which has a 38% weight in the IIP.
India’s benchmark stock indices have bounced back by more than 15% from August lows on the back of export-led improvement in the trade deficit and the strengthening of the rupee, but the latest data suggests real economic recovery will take time.
Both the finance minister and the RBI governor expect the economy to expand 5-5.5% in 2013-14.

Finance Minister P Chidambaram and Reserve Bank of India Governor Raghuram Rajan are expecting a good performance by the farm sector following a bountiful monsoon despite growth hitting a four-year low of 4.4% in the first quarter. That came after the slump to a 10-year low of 5% growth in the year to March.
Most private forecasts for the year are in the range of 4%, while IMF has pegged it at 4.25% (3.8% in terms of market prices) because of lacklustre industrial growth and slowing services
Industrial production was up just 0.1% in April-August and the possibility of a further hike in interest rates by RBI to tame inflation rules out any sudden reversal of this trend.
RBI Governor Rajan had raised the repo rate by 25 basis points on September 20 after wholesale inflation accelerated to a six-month high of 6.1% in August and retail inflation stayed close to double digits. He has indicated that bringing down inflation expectations is his key priority.
Manufacturing, the largest component in the index, dropped 0.1% in August from a year ago and volatile capital goods production, a measure of investments, contracted 2% after a strong 15.6% rise in July. Mining output fell 0.2%.