Will unfolding eco data bring a cheer?
Rohit Joshi and Siddharth Tak/ Zee Research Group
Will key economic data due for release in the next 10 days bring a cheer for UPA mandarins or add to the current somber mood pervading the business and economy?
The government is due to release key economic data including on trade balance on April 10 and IIP data for the month of February on April 12. On the same day, consumer price index (CPI) data for March would be released. Furthermore, wholesale price index (WPI) for the month of March would be released on April 15.
The output of the eight core sectors contracted 2.5 percent during the month of February. This data, which was released by the commerce ministry, has nearly a weight of 38 per cent in the Index of Industrial Production (IIP).
Owing to this, analyst community is expecting poor IIP number for the particular month. After contracting for the two consecutive months, industrial output (IIP) rebounded 2.4 per cent in January 2013. For the first ten months of last financial year, industrial growth stood at 1 per cent against 3.4 per cent in 2011-12.
Even, the widely-tracked HSBC purchasing managers` index (PMI) data revealed that India`s manufacturing sector has expanded at a 16-month low in March. It (PMI) stood at 52 points in March, against 54.2 in February and 53.2 points in January.
After accelerating for the five consecutive months, CPI for February rose to 10.9 per cent as against 10.8 per cent in January. Owing to high food inflation, CPI has inched up. The headline inflation rate (WPI) rose to 6.84 per cent after falling to a three-year low of 6.62 per cent in January 2013. Although core inflation for February softened to sub 4 per cent level which is in line with RBI’s comfort zone yet the overall WPI inflation is still at stubborn levels.
Sounding not optimistic about the upcoming economic data, DK Joshi, Director and Principal Consultant, CRISIL, said, “I think that the upcoming data would remain weak and low for the next two months. Although IIP print would be subdued for the month of February yet WPI figure would be around 6.5 per cent. This can be termed better in comparison to last month figure of 6.84 per cent.”
In sync with Joshi, Saugata Bhattacharya, chief economist, Axis Bank, said, “Inflation print for March will definitely be better than market expectations. Moreover, trade deficit data is also likely to be somewhat better. However, IIP data will be weak.”
Reiterating the view, Jyotinder Kaur, senior economist at HDFC Bank, said, “The upcoming data will not necessarily support the government position. While IIP is expected to contract by 1.4 per cent (won’t provide any relief to the government), WPI would get better to 6.2 per cent levels. I don’t know how much comfort will the lower inflation print provide to the government taking into account poor IIP numbers?”
Trade deficit data has narrowed from nearly 20 billion dollars in January to 14.92 billion dollars in February. “I expect trade deficit to be around 15 -16 billion dollars (similar to February levels) in the month of March. There could be some relief on the external balances but the focus clearly will be on the dismal growth. Furthermore, I don’t think that any improvements in inflation and external balances will be able to absorb the wrongdoings of the government at least in terms of growth,” she added.