Industrial production likely contracted by 0.5 per cent in November

India's industrial production likely shrank by 0.5 per cent, after growing at a robust 8.2 per cent in October.

An NDTV poll of 17 brokerages and investment banks has found that the Index of Industrial Production (IIP), measuring the output at factories, mines and utilities, contracted by 0.5 per cent. It grew 5.9 per cent in November last year.

The banks polled include Nomura, CLSA, ICRA, Axis Bank, CARE, Credit Suisse, Deutsche Bank, HDFC Bank, HSBC, ICICI, ING Vysya, IndusInd Bank, Kotak Mahindra, Religare, RBS, Standard Chartered, and Yes Bank.

Production was likely hit as Diwali, which sees many factories shutting shop for a day or two, was celebrated in November last year. The year before, the festival was in October.

Infrastructure output, or core output data, which is typically released before the headline number and accounts for nearly 38 per cent of overall industrial production, grew 1.8 per cent year-on-year in November, sharply slower than in the previous month.

India has been plagued by sticky inflation, burgeoning deficits, a slowdown in domestic savings, a slump in exports and economic growth that is likely to be the worst in a decade.

Both the Reserve Bank of India and the government have recently expressed concern over the ballooning deficits, particularly the current account gap which was the widest in absolute terms since 1949 in September.

Economists will closely watch December inflation data due to be released on Monday for further signs that the RBI could cut rates. Inflation likely reversed direction and edged up in December on higher food costs, a Reuters poll showed, but economists said declines in previous months will still give the central bank room to cut interest rates in support of growth.

Expectations for a rate cut when the RBI's policy committee meets on January 29 hardened last month after November wholesale price data showed inflation at a 10-month low.

Despite a clamour among politicians and business for lower interest rates with gross domestic product (GDP) growth in 2012-13 headed for a decade low, the size of the fiscal and external deficits and hitherto stubborn inflation has stayed the central banks' hand.

Economists were wary about predicting a sustainable upturn based on the positive factory production forecasts.

In a report released Thursday, 10 January 2013, HSBC cut its GDP forecast for the year ending in March to 5.2 per cent from 5.7 per cent, and its forecast for the next fiscal year to 6.2 per cent from 6.9 per cent. The bank had previously cut its India growth forecasts for fiscal 2013 and 2014 in September.

(With inputs from Thomson Reuters)