Industry hits a sweet spot

The latest data suggest that India’s industrial sector has strengthened significantly in recent months, underlining that any disruption from the introduction of the GST in mid-2017 was short-lived. Industrial production growth rose to a two-year high of 8.4% y/y in November. In addition, the manufacturing PMI reading for December rose to a five-year high. Prospects for industry look bright over the near term. If nothing else, IP growth in y/y terms will receive a statistical boost due to the weakness caused by demonetisation in the early stages of 2017 setting up a fairly weak base for comparison. But underlying momentum in industry looks set to strengthen in any case. Once fully bedded in, the GST should help local manufacturers by simplifying the tax system and facilitating domestic trade.