The IIP for April came in surprisingly at 3.4% v/s -0.1% (MoM). It really left everyone kind of baffled; maybe it is the spurt in the manufacturing sector which showed the jump and also the capital goods. But then the Manufacturing PMI was down thus somewhere this does not add up. Given this kind of volatility in the IIP and a huge disconnect between the actual ground realities, in the background of today’s research report by Arvind Subramanian which stated that the GDP numbers could be overstated by 2.5% from 2011 to 2016, it kind of puts all growth reports coming from the Govt under a cloud. One cannot help but wonder about the very credibility of these numbers, even that announced today. Wonder when the Govt is going to address this; after all, Subramanian is not a small fry and the report is published by none other than the institute of Harvard.

Internals of IIP: (MoM)

Manufacturing 2.8% v/s -0.4%

Capital goods 2.5% v/s -8.7%

Primary goods 5.2% v/s 2.5%

Intermediate goods 1 v/s -2.5%

Consumer durables 2.4% v/s -5.1%

Consumer nondurables 5.2% v/s 0.3%

In terms of industries, fourteen out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of April 2019 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of wearing apparel’ has shown the highest positive growth of 33.6% followed by 22.6% in ‘Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials’ and 16.3% in ‘Printing and reproduction of recorded media’. On the other hand, the industry group ‘Manufacture of paper and paper products’ has shown the highest negative growth of (-) 12.3% followed by (-) 9.6% in ‘Manufacture of fabricated metal products, except machinery and equipment’ and (-) 3.5% in ‘Manufacture of other transport equipment.’

Well, we have these numbers as of now to work with, real or doctored and we should just assume that it gives us a slight inkling about what could be the happening on the ground.

In terms of CPI for May, it came in at 3.05% v/s 2.92% (MoM). Seasonally, this is the time when food and vegetable prices do rise and will do so till winter. Hopefully, the farmer gets the advantage of these prices going up. Significantly, despite the price rise, it remains much below the RBI’s target of 4% (+/-2). Does this mean that the RBI will go for another rate cut in August? Well, for that, the progress of the monsoon will be very crucial. It would be too presumptuous to predict RBI action at this juncture.

Internals of CPI: (MoM)

Food 1.83% v/s 1.1%

Pulses 2.13% -0.89%

Vegetables 5.46% v/s 2.87%

Fuel & light 2.48% 2.56%

Housing 4.82% v/s 4.76%

Cereals 1.24% v/s 1.17%

Clothing & footwear 1.8% v/s 2.01%

Transport & Communication 1.63% v/s 2.4%

Well, we can, at this juncture just say that growth in India would really pick up from the second half. RBI reducing rates might help boost demand and improve sentiments. One does not know if this IIP is sustainable. There is a lot of uncertainty, especially on the global front and till that settles, growth will continue to struggle.

Now all eyes will be on 5^th July and there is hope that in the Union Budget, more than doling out money for social welfare schemes alone, the Govt would look pragmatically at what needs to be done to boost industrial growth, create jobs and improve the consumption story.

More importantly, this falling credibility in the Govt numbers needs to be addressed on an urgent basis. With every single decision being made on the basis of whatever data comes from the Govt, it’s indeed very worrisome that today we are grappling with credibility issues.