India-consumption story continues

Industrial growth in July-09 at 6.8% continues to surprise us on the upside. The strong growth in Jul-09 took place despite softening of growth in the core sector and continued strong contraction in India’s exports.

In step with our expectations, growth in consumer goods (8.8%), both durables (19.8%) and non-durables (5%), has strongly accelerated. At the same time, growth in basic goods (4.8%) decelerated and capital goods (2%) retained low growth.

Analysts have raised our FY10 industrial production growth target last month from 5.4% to 6.5%. To achieve this target, industrial growth for the rest of FY10 needs be 7.4%.