Factory output is likely to be in the range of 1-2 per cent in August and industrial performance will remain a concern for the next few months due to a slew of reasons like low demand, high interest rates and pessimistic investment scenario, says a report by Dun & Bradstreet.
According to the global research firm, the index of industrial production (IIP) is expected to remain subdued for the next few months, except for the festive months during which demand usually uplifts industrial production.
"Going ahead, IIP is expected to remain in the range of 1.0 per cent-2.0 per cent during August 2013," the report said.
Industrial production grew 2.6 per cent in July, expanding for the first time in three months, on improved performances in the manufacturing and power sectors, raising hopes of a recovery and expectations the RBI will cut interest rates to boost consumer demand.
"Since the implications of the policy measures will unfold over a period of time, the current scenario is likely to remain vulnerable to a large extent over the development in the external environment," Dun & Bradstreet India Senior Economist Arun Singh said.
The reversal of the headline inflation, sustained weak output in industrial segments and continued moderation in overall growth are likely to dampen investor sentiment further, he added.
The Government therefore needs to complement RBI's efforts towards curbing inflation by appropriately addressing supply-side bottlenecks," Singh said.
On the price front, D&B believes that the strong depreciation of rupee, along with elevated global crude oil prices, is likely to provide upward pressure on overall inflation in the near term. D&B expects the WPI inflation to remain in the range of 6.1-6.3 per cent during September 2013.