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Inflation + Industrial Production

March 14, 2011

India’s Feb inflation rose to 8.3% ahead of consensus estimates of 7.8%. The trends in the Fuel Index and Primary Articles were in line with weekly readings, the rise in Manufactured Products (+4.9% vs. 3.8% last month) was the key reason for the higher-than-expected Feb inflation data. December inflation was revised up from 8.4% to 9.4%YoY, with the key revisions being in primary articles and manufactured products.

Going forward, the uptrend in manufactured non-food product inflation coupled with the impact of higher oil prices poses an upside risk to the Indian economy which is shaken on the back of Governance Deficit and forthcoming elections in 4 Indian states.

The Industrial Production Index (IP) grew 3.7% yoy in January, above the revised 2.5% yoy (from 1.6% yoy) growth in December. Consumer goods increased by 11.3% yoy as compared to 3.7 % yoy in December, driven by high growth in both consumer durables and consumer nondurables. The lumpy Capital Goods Index declined sharply by 18.6% yoy after the fall of 9.3% yoy in previous month.

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