IIP to only grow 0.5% in Jan due to subdued local and global demand

PTI

Index of Industrial Production (IIP) will remain weak and may only grow up to 0.5% during January, on account of various constraints, including subdued domestic demand and an uncertain external demand, according to Dun & Bradstreet's latest economic forecast.

"Industrial sector faces constraints from subdued domestic demand and weak, uncertain external demand on one hand and financing constraints, rising input prices and stalled projects on the other hand," D&B said in a report.

"We expect Index of Industrial Production (IIP) to remain weak and grow by only 0.0% - 0.5% during January 2017," it added.

Besides, the report said firming up of global commodity prices as well as depreciation of the rupee poses significant upward risk to inflation.

D&B estimates CPI (consumer price index) inflation is expected to be in the range of 3.4% -3.6% and WPI (wholesale price index) inflation to be in the range of 5.5% -5.7% in February.

"While WPI inflation is expected to edge further upwards, the second-round impact of the industrial input prices will feed into the inflation in the coming months," the report said.

"Moreover, while cost push pressures are building up, demand pull inflation might be impending as re-magnetisation measures gets underway," it added.

Further, it noted that the record food grain production and the thrust in the rural demand in the Union Budget are also likely to fuel demand side pressures.

As per D&B analysis, the rupee will trade in the range of around 67.10 - 67.30 per US dollar during February.

"Expectations of a US Fed rate increase, surge in global commodity prices, year-end oil related dollar payments, geopolitical uncertainty and over-valuation of rupee will pressurise rupee to move downwards going ahead," it said.