The prevalence of upside risks is likely to contribute to a weaker rebound in the overall economic activity. Moreover, the volatility in the Index of Industrial Production (IIP) continues to render uncertainty to the timing of a sustainable recovery in the industrial activity. Within IIP, the electricity sector which has been resilient so far has also slowed down considerably.
Commenting on the outlook, Arun Singh, senior economist, Dun & Bradstreet India stated,''The IIP growth is expected to remain subdued during the next five to six months as the industrial activity consolidates before recovering. The significant slowdown in the bank credit to the industrial as well as the services sector in such a scenario is a cause of concern. We hope that the measures taken by the Government and the expected easing of policy rates by the RBI during Q4 FY13 will support in reviving the business sentiment and the industrial activity in the medium to long term.''
While the easing of inflation on the back of moderation in the manufactured as well as the fuel group provides some solace, easing of the food price inflation is necessary for the moderation of the overall inflation on a sustainable basis. However, upside risks to inflation persists in case the government decides to raise the price of the regulated fuel, he said.