IIP AND CPI TO BRING IN CHEER AND BELATED FESTIVITY!
By Ruma Dubey
Well, the market is going to surely like this November IIP of 3.8% and December CPI came in at 5%. Both the numbers are extremely good, much better than many estimates and most certainly better than numbers of previous months.
The bounce back in the November IIP was led by mainly by the manufacturing sector due to increase in production to restock inventories, which in all probability were depleted due to the festival season which had gone by. Also Diwali, this year came in during October and not November like last year and this too has led to the surge in the November IIP.
More than the base effect, there are three specific reasons for this ramp up in manufacturing numbers – turnaround in infra sector. We got an indication of the same when we got the output numbers of 8 key infra sectors which together contribute some 38% to the IIP. This showed a growth of 6.7% (YoY); this in itself was an indication that industrial growth would rise in November. Secondly. exports have also shown a turnaround and so did automobiles – which have shown a turn from a negative to the positive. These two tunrarounds too contributed to the growth in IIP, more so than the base effect.
Just as manufacturing was the big push, consumer non-durables was also very good though consumer durables remains worrying bad. In fact consumer durables have shown a decline for the past 23 consecutive months and this indicates that mood of the people on the ground, when it comes to spending, continues to remain cautious.
Having said all this, looking into the internals of the IIP shows that instead of some major infra goods manufacture pushing up manufacturing growth, it was electrical machinery & apparatus which showed the highest positive growth of 10.5%, followed by 9.6% in ‘Wearing apparel; dressing and dyeing of fur’ and 5.3% in ‘Luggage, handbags, saddlery, harness & footwear; tanning and dressing of leather products. In fact 16 industries out of the 22 in the manufacturing sector, showed a negative growth (MoM) and this, like last month, was led by ‘Radio, TV and communication equipment & apparatus’, showing a fall of 70.2%, followed by (-) 31.6% in ‘Office, accounting & computing machinery’ and (-) 24.7% in ‘Furniture; manufacturing.
On other hand, some of the other important items showing high positive growth during the current month over the same month in previous year include ‘H R Sheets’ (168.2%), ‘Polythene Bags Incl. Hdpe and Ldpe Bags’ (81.3%), ‘Vitamins’ (52.6%), ‘Conductor, Aluminium’ (32.6%), ‘Pens of All Kind’ (31.0%), ‘Ayurvedic Medicaments’ (29.7%) and ‘Stainless/ alloy steel’ (20.7%).
Turning to the CPI numbers, at 5%, this is a very good number. Food inflation came in at 4.78% v/s 3.14% (MoM) and vegetable price was at 0.58% v/s -10.9%. Combined fuel, light inflation rose slightly to 3.41% v/s 3.27% while Clothing, footwear, bedding inflation lowered to 6.51% v/s 6.97%.
These two numbers have been good and looking ahead, it is probably giving RBI a lot of headroom for a rate cut. And as Rajan had promised, the rate cut could come outside the policy too. December is seasonally always good and this means, we can look forward to cheerful numbers next month too.