IIP figure low, but getting healthier, say experts

India's industrial production rose by a higher-than-expected 2.7% in August from a year earlier, after contracting in July.

The following are comments by experts regarding the IIP data:

Rupa Rege Nitsure, Bank of Baroda, Mumbai

"Sequentially it still shows a decline of 1% on July but year-on-year the number looks healthy because of the base effect but the number is still very bad and shows continued weakness in the industrial sector and is in line with the signals given by other indicators like core industrial output, exports, PMI and passenger car sales, all of which showed a sharp deceleration in August.

"With inflation hovering around 7.7% and industrial sector showing continued weakness, we are in a typical stagflationary situation. The RBI will go ahead with its tried and tested method of reducing CRR (cash reserve ratio) as that also helps banks lower their cost of funds and increase lending. I do not expect the RBI to touch rates on October 30 and deliver just a 25 basis point CRR cut."

Sujan Hajra, Chief Economist, Anand Rathi, Mumbai

"Today's factory output data is much better than expectations, but it is still not a very healthy number. It really does not change the big picture as far as the monetary policy is concerned. We still expect substantive liquidity easing and a 25 basis point cut in the cash reserve ratio on October 30.

"For the full year, we expect IIP at 4.6%."

Upasna Bhardwaj, ING Vysya Bank, Mumbai

"While IIP figures have come better than expected, we expect RBI to consider the recent spate of remedial measures undertaken by the government and be more watchful about the upcoming inflation figure before taking a policy decision."

G Chokkalingam, Centrum Wealth Management, Mumbai

"IIP alongside other indicators like oil imports support argument of a recovery in industry sector. The 2.7% growth is still however lower by historical standards. Interest rate cut would be the most important thing to watch next."