April IIP data comes in at a dismal 0.1%; raises prospects of a rate cut

The industrial output data for April has come in at a disappointing 0.1%, against negative 3.5% reported in the previous month, raising the prospects of a repo rate cut by the Reserve Bank of India.

The manufacturing index growth has come in at 0.1% in April vs -4.4% in the month of March 2012. The intermediate goods growth on the other hand has fallen to 1.4%.

Capital goods continued to be the biggest disappointment declining 16.3%. The April electricity growth has come in at 4.6% vs 2.7% in March.

The consumer-durable goods saw a big jump in growth to 5% as against 0.2% in March.

Despite coming in low the IIP data saw markets climbing as it raised the prospect of a rate cut hope. Reserve Bank of India officials are slated to meet on June 18, 2012 to review the monetary policy. It is widely believed that the RBI would cut repo rates in its policy meet, as the GDP data and now the index for industrial production data has seen a decline.

In fact, analysts are looking at the possibility of the RBI cutting repo rates by 50 basis points, rather than 25 basis points. However, the nation's central bank would also have to keep in mind inflation, which continues to remain at elevated levels.

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