India industrial production likely to rise 3 pct on-year in April on stabilising domestic, export trends: DBS Bank

India’s April industrial production is expected to rise 3 percent y/y, from 2.7 percent, backed by stabilising domestic and export trends. This jump is likely despite a slower infrastructure industries index growth at 2.5 percent, which was distorted by high base effects and payback from the sharp rise in the month before (on a sequential basis).

Capital goods output might extend its decline, whilst primary and consumer durables output picks up the slack. PMIs and auto sales (except commercial vehicles) trends suggest improving demand will be supportive of output trends. Beyond April, IP growth is likely to hit a soft patch as producers draw down on inventories ahead of the GST rollout, but trends will improve as restocking demand returns later in the year, DBS Bank reported.

May inflation and April industrial production numbers are due today. The wholesale price index will be out Wednesday and trade numbers, also for May, due anytime this week. CPI Inflation is likely remained on a slippery slope in May, easing to 2.3 percent y/y from 3.0 percent in April. Food inflation is poised to decline marginally on-year, on improved supplies along with high base effects (May16’s -7.2 percent y/y).

Imported price pressures were contained on stable crude prices and a strong currency. This could see the transport component rise by a slower pace, notwithstanding favourable base effects. Some offsetting impact is likely from the miscellaneous category as discretionary spending stabilises on re-monetisation and firmer gold prices (through the personal effects segment).