The Index of Industrial Production (IIP) will remain on the growth path in September 2014, according to ZyFin Research's Business Cycle Indicator (BCI). The BCI is a lead indicator to IIP final estimates, and the August reading (corresponding to IIP trend in September) is at 8.1%, up from 7.7% in the previous month.
The BCI's advance estimate of the IIP trend has a success rate of more than 70%. The steady incline in the BCI since April 2014 signals the revival in Indian business environment. This is, however, yet to develop into a growth phase, owing to weak consumer confidence.
Debopam Chaudhuri, chief economist, ZyFin Research, said, "With IIP undergoing a healing process, the biggest worry right now is that weak consumer confidence will impede the recovery. Monthly data suggests consumer confidence around employment has declined the most. This makes it more pertinent for the new government to initiate serious expectations management of end consumers. This needs to be done while the benefits of economic reforms are still to be felt on the streets."