Industrial production rose 16.7% yoy, higher than our expectations, but broadly in line with consensus. Growth, which initially started picking up in Jun 09, gathered momentum post August and has averaged 12.7% since then v/s 1.9% in the same period last year. On a fiscal year basis (Apr-Jan), growth was 9.6% v/s 3.3% in the same period last year.
The strong numbers are reflective of (1) the base effect (2) the impact of the stimulus measures and (3) the economy gathering steam as reflected in both micro and macro level data. We expect the RBI to begin hiking policy rates in its April 20 policy.
On a sectoral basis, growth was led by (1) mining up 14.6% – still incorporating the impact of KG gas, (2) manufacturing up 17.9% – while electricity came in at 5.6%.
On a use-based basis (1) Despite a relatively high base, capital goods remained the outlier for the 2nd consecutive month, up 56.2% in Jan (39% in Dec) – attributed mainly to machinery and equipment. Similar to recent trends, Intermediate goods and basic goods were up 21.3% and 10.7%, and (3) consumer goods were up 4.2% led by durables up 31.6% while non-durables.