IIP to accelerate on restocking, externalities: Moody's

Industrial output, which grew at a 22-month high of 10.4 per cent in August, is set to accelerate further on inventory restocking and improving external factors, rating agency Moody's said today.

"In coming months industrial production growth is expected to accelerate," Moody's research arm Economy.Com associate economist Nikhilesh Bhattacharyya said in a note today after the government released industrial growth data.

Factory production grew by a whopping 10.4 per cent in August on the back of double-digit growth in mining, manufacturing and electricity sectors, the data showed. It had expanded by 1.7 per cent in the year-ago month.

"The purchasing manager's index indicates new orders and production have risen at a fast pace ... Stimulus has boosted rural consumer demand and construction activity... Aided by firming property prices," Bhattacharyya said.

An inventory adjustment effect will also boost production activity, with many firms having cut stocks earlier this year in anticipation of a prolonged downturn that looks increasingly unlikely now, he said.

"External and financial factors are also set to begin aiding rather than dragging on production growth," he said. There would be a gradual improvement in global growth, which, he said, has begun in the third quarter.

Domestic interest rates have fallen and lending conditions have begun to ease, which along with recovering business confidence will boost credit growth and capital goods production, Moody's economy.com said.