Moody's Analytics sees more economic gloom ahead

'March IIP to fall 1.5%, April WPI inflation to rise to 6%'

Moody's Analytics has projected industrial production to contract in March and wholesale inflation to rise in April.

The research arm of Moody's Corporation said the Index of Industrial Production (IIP) would fall 1.5 per cent in March, signalling a decline for the second month in a row. Wholesale Price Index (WPI)-based inflation would rise to 6 per cent in April from 5.7 per cent in March, it said.

Moody's Analytics attributed the IIP projection to continued headwinds from weak demand.

It said industrial production has been flat to slightly negative in the past few months, weighed down largely by weak demand and supply as well as infrastructure limitations.

After falling for three consecutive months till December 2013, IIP grew by a modest 0.76 per cent in January but fell 1.9 per cent in February 2014.

The index contracted in seven months of the 11 in 2013-14 for which data has been released.

If industrial output falls by 1.5 per cent in March, it would contract 0.24 per cent in 2013-14. In the previous financial year, IIP had risen just one per cent.

Moody's Analytics said: "Manufacturing is contracting on a year-ago basis, with mining close to flat but electricity production rising strongly thanks to earlier investment. Headwinds from weak demand will continue to cap production."

In March, WPI-based inflation rose to a three-month high, snapping the declining trend. The increase was across three broad sectors - food, fuel and manufacturing.

"Food prices are rising because of higher vegetable prices, while the steady scaling back of subsidies is lifting fuel and diesel prices. Price growth of manufactured goods, which best resembles core inflation in India, has begun to increase from low levels," said Moody's Analytics.

Inflation, which has been on a decline since December 2013, dropped to a nine-month low of 4.68 per cent in February.

IIP data for March and WPI inflation for April will come next week.

If Moody's Analytics predictions come true, it might dash the hopes of an early revival in the economy. India's economy is officially projected to grow 4.9 per cent in 2013-14, after it rose a decadal-low of 4.5 per cent in the previous year.