Poor IIP not likely to change RBI's policy stance

Experts say apex bank may not cut interest rates in June, will wait for inflation data, global oil prices

India's industrial output unexpectedly contracted 3.5% in March from a year earlier, according to a government data released today.

Here are some experts commenting on the data:-

Dariusz Kowalczyk, economist, Credit Agricole CIB, Hong Kong

"The contraction was driven by particularly poor performance of the manufacturing sector, in line with weak exports that month.

"We believe that April saw a turnaround, but until this is confirmed, sentiment will be weak. The data increases the odds of another rate cut, is negative for the INR, and should push INR OIS rates and bond yields down."

Siddhartha Sanyal, Chief India economist, Barclays capital, Mumbai

 

"I don't think just one data point, and that too IIP, will change the RBI (Reserve Bank of India) policy stance. But we are of the view that incrementally RBI will have to cut rates more and sound dovish. RBI will have a bias to not cut rates till July, but may have to start after that. We expect another 50-75 basis points rate cut in this year."

Saugata Bhattacharya, economist, Axis Bank, Mumbai

"The IIP number will not lead to a knee-jerk reaction from the Reserve Bank of India. I don't think there will be a reduction in interest rates in June.

"They will wait for other indicators like inflation, and also the global crude oil prices and reform measures taken by the government before deciding on rate cuts."