Factory output, or index of industrial production (IIP), is expected to have turned positive in February after three straight months of contraction. The two key sectors that are seen as having driven the factory output growth are electricity generation and mining, according to a Religare research report.
"IIP growth is set to turn positive in Feb'16 (+1.3% YoY) after declining in each of the last three months. Healthy electricity generation and mining activity is expected to aid growth, even as manufacturing remains weak," said Religare Institutional Research in its note.
It may be recalled that eight core industries posted the highest rate of growth in 13 months, according to provisional data released by the Indian government March 31. The eight sectors account for about 38 percent of India's industrial output. The growth was driven mainly by fertilizer, cement and electricity sectors.
"Electricity generation had risen by 6.6 percent in Jan'16 (Apr-Dec'15: 4.5 percent) and should accelerate further to 9.4 percent in Feb'16," the note said, and added: "Overall, the pace of mining activity is likely to have picked up to ~2.5 percent in Feb'16."
However, manufacturing activity is likely to show weakness even in February. "Manufacturing output, after falling in each of the last three months, is likely to turn around in Feb'16, but remain weak (at just 0.2%) vs. H1 levels," the note said.
IIP for December and November 2015 too had declined to 1.2 (revised) and 3.4 percent, respectively, over the same corresponding months last year.
The Indian government is likely to release IIP and inflation data this week.
Retail inflation eased to 5.18 percent in February this year after having hit a 17-month record high of 5.69 percent in the previous month.
