IIP to remain weak: Moody's Analytics

August trade deficit to widen, industrial sector continues to report poor production figures,says research firm

Even as the core sector grew 3.1 per cent in July against 0.1 per cent in the previous month, Moody’s Analytics, a research wing of Moody’s Group, projected industrial production to remain weak in July and the remaining months of the current financial year. Eight core industries constitute 38 per cent of the Index of Industrial Production (IIP).

The research firm also forecast the trade deficit to rise in August, a worry that might cast its shadow on India’s current account deficit.  “(Industrial) Production is expected to remain anemic for the rest of 2013,” Moody’s Analytics said. It said India’s industrial sector continues to report poor production figures.

“The consumer sector is growing below potential while weak demand, supply bottlenecks, and the uncertainty created by a timid central government are lingering problems for the wider economy,” it said.

IIP contracted 2.2 per cent in June when the core sector rose 0.1 per cent. In the first quarter of the current financial year, IIP fell 1.1 per cent against a decline of 0.2 per cent in the corresponding period of 2012-13.

On the trade front, Moody’s Analytics predicted trade deficit to widen in August, following July’s $12.3 billion shortfall.

It said exports unexpectedly surged in July, though the underlying trend is still weak. After two straight months decline, exports rose 11.6 per cent in July.

Moody’s said exports and imports are expected to expand below trend in the coming months.

The government has targeted to raise exports to $325 billion in 2013-14, a little over eight per cent over $300 billion in 2012-13.

Growth prospects still weak: OECD

India's growth prospects in the near term are weak and it is facing financial turmoil triggered by possible tapering of the quantitative easing in the US, said Paris-based OECD. The projection comes against the backdrop of slowing growth and the rupee falling sharply, amid a high current account deficit. (PTI)