Macroeconomic Forecast India

Even though Indian industrial production (IP) growth for the month of January surprised to the upside, coming in at a seven-month high 6.8% y-o-y (up from 2.5% in December), we believe that it would be unwise to read too much into the latest figure. This is due to the fact that output was largely skewed by a spectacular surge in consumer non-durables IP, skyrocketing from 14.0% y-o-y in December to 42.1%, which we believe will prove transient in nature. The bounce in headline IP is largely in line with our view that headline real GDP growth will see a slight uptick in Q112.

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