India’s industrial production review

Today Indian industrial production data showed better growth.

Why important?

• Data represents monthly changes in Industrial activity which is vital to judge the underlying strength of the economy.
• Moreover, lot many data on Indian economy are published regularly. So this is followed by domestic and foreign participants closely.

Past trend -

• Industrial production strongly improved in from april of 2014 with increase in optimism as a new government come to power.
• Activities lagged somewhat thereafter in 2014 as explained in chart.

 Today -

• Industrial activity improved at a better rate. Industrial output increased by 2.6% in January compared to previous 1.7%.
  
• Manufacturing activity rose by 3.3% for the same period compared to previous 2.1%.

Analogy -

• Reserved Bank of India has loosened the monetary policy by reducing rates twice this year. This will be further supportive of industrial activity. Trend suggests that hard data like Industrial production have started following the soft ones like economic sentiments that already pointed to improvement.
  
  
• Nifty - Stock market was closed when the data was released but improvements in activity would provide support for it. Nifty is currently trading at 8776, up 0.87% for the day still about 500 points down from its recent all-time high.
  
  
• INR - Rupee has performed a lot better than its peers last year and may put similar performance this year too. INR is currently trading at 62.45 against dollar, up nearly 0.50% for the day.