Nov IIP may grow slightly as global demand picks up

By Yati Himatsingka

BANGALORE (Reuters) - Indian industrial output probably returned to modest growth in November after shrinking for the first time in four months in October, helped by better overseas demand, a Reuters poll showed.

Industrial production (IIP) in November was expected to grow 1.0 percent from a year earlier, after shrinking 1.8 percent in October, according to the median consensus of 20 economists.

"November industrial production is unlikely to deviate from the recent stabilisation in activity, albeit still at weak levels," said Radhika Rao, an economist at DBS in Singapore.

The production data, due on Friday, will not ease concerns as policymakers in Asia's third-largest economy grapple with slowing growth while also battling rampant inflation.

Still, rising demand for India's goods from abroad should provide some cheer.

"Exports are improving because of a pick-up in global demand so that should provide some support to IIP," said Anubhuti Sahay, economist at Standard Chartered.

Merchandise exports in November grew 5.86 percent from a year earlier to $24.6 billion compared with a fall of 4 percent a year ago.

Indeed, the latest survey of purchasing managers also showed better export orders for Indian factories.

In addition, November infrastructure output showed core industries such as coal, electricity, cement, crude oil and steel - bounced back from a contraction in the previous month.

Output at those industries, which account for more than a third of overall factory production, rose 1.7 percent annually that month after shrinking 0.6 percent in October, according to data last week.

"We are yet to see any impact of the approvals of infrastructure projects by the government in the past few months. So whatever boost we will see in IIP will primarily come from the export sector," said Sahay.

But a dearth of investment and the government's inability to authorise new projects ahead of a general election later this year will keep factory growth subdued.

(Polling by Ashrith Doddi; Editing by Jacqueline Wong)