Indian economy shows signs of recovery

The New Year started on good note as the eight core sectors data for the month of November 2017 posted a 13-month high growth of 6.8 per cent year-over-year versus 5 per cent in the month of October. With the improvement in non-food credit, we see the economy heading towards pre-demonetization level.

Current IIP of 6.8 per cent shows revival post the demonetization and GST jolts. This was largely aided by robust output rise in cement & steel sector. Both the sectors saw yoy increase of 17.3 per cent & 16.6 per cent over November 2016. Other key sectors like electricity, natural gas, refinery products also saw improvement of 8.2 per cent & 2.4 per cent yoy. More than 60 per cent of the total index saw growth in production for the month of November.

However, on the other hand, credit pick up by the industries for August to September period declined by Rs. 7,100 crore. This remains as an overhang for the growth of industries. Overall improvement in credit growth was aided by more than 60 per cent growth in credit offtake by services industry and another 38 per cent to personal loan segments.

With revival in industrial production, we expect credit growth in industrial segment to pick up in the coming quarters. However, RBI’s policy stance remains contingency for the upcoming quarter.