Index of Industrial Production (IIP) is expected to grow by 10.5 -10.8 per cent during September, according to Dun & Bradstreet economic forecast for October.
Improved consumption due to the festive season and support from export demand has aided the recovery in industrial activity. At the same time, the record production of summer food grains in the agriculture sector will stimulate rural demand, according to Dun & Bradstreet.
"India's growth prospects are improving, so are both consumer and business confidence levels. The acceleration in the vaccination drive and easing of concerns of the third wave is expected to add to the growth momentum. Reforms in the telecom sector and the clearances given to the Production Linked Incentive (PLI) scheme should boost domestic manufacturing by attracting both domestic and international players," said Arun Singh, Global Chief Economist, Dun & Bradstreet, in a statement.
Consumer Price Inflation (CPI) is expected to be in the range of 3.6- 3.8 per cent, and Wholesale Price Inflation (WPI) to be around 10.6 - 10.8 per cent in October 2021. Inflation and wholesale inflation for October will remain lower or at similar levels as last month. Trends suggest that inflation will increase in the future given the surge in global commodity prices and rebound in consumer demand. The central bank's attempt to withdraw excess liquidity will rein in inflationary pressures, the report says. The increase in energy prices is likely to impact core inflation and pose a policy dilemma for the RBI.
While the demand is expected to be robust, companies are facing supply-side constraints, and this is expected to pose policy challenges for both the government and the RBI," said Arun Singh.
The forecast says that domestic factors like recovery in growth, foreign fund inflows and dollar reserves with the RBI favour the rupee. Still, external factors will cause the rupee to depreciate strongly. Dun & Bradstreet expects the rupee to depreciate to 75.0 -75.2 per US dollar during October 2021.
The report says that the spiraling global commodity prices, with domestic diesel and petrol prices hitting a record high, is fueling concerns about a wider fiscal deficit and rising inflation.
"Global energy prices are at a multiyear high and if this continues to remain elevated, there could be pass-through of price rise at the factory gate level and eventually into core inflation. Inflation, which has currently moderated, could thus turn unfavourable for economic growth. Moreover, support from external demand could weaken from the current level if global supply-chain disruptions persist and the pace of recovery for the global economy moderates in Q4 2021," added Arun Singh.