India's growth prospects are improving, says Dun Bradstreet

Index of Industrial Production IIP is expected to grow in September by 10.5 - 10.8 per cent, 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 WPI is expected to be in the range of 3.6 - 3.8 per cent and Wholesale Price Inflation WPI will be around 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 rebound in global commodity prices and the surge in consumer demand. The central bank's attempt to rein in inflationary pressures will rein in excess liquidity, the report says. The increase in energy prices is likely to impact core inflation and pose a policy dilemma for 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 RBI, said Arun Singh.

The forecast says that domestic factors like recovery in growth, foreign fund inflows and dollar reserves 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 in 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 therefore 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 Q 4 2021, added Arun Singh.