JAN IIP - COMES AS A PLEASANT SURPRISE
By Ruma Dubey
| PARTICULARS |
| Jan’13 |
| Dec’12 | Nov’12 | Oct’12 | Sept’12 | Aug’12 | YoY |
| IIP |
| 2.4% |
| -0.6% | -0.1% | 8.2% | -0.4% | 2.7% | 2.7% |
| Cons Durable |
| -0.9% |
| -8.2% | 1.9% | 16.5% | -1.7% | 4% | 5.1% |
| Manufacturing |
| 1.1% |
| -0.7% | 0.3% | 9.6% | -1.5% | 2.9% | 2.8% |
| Capital Goods |
| -1.8% |
| -0.9% | -7.7% | 7.5% | -12.2% | -1.7% | -16% |
| Basic Goods |
| 3.4% |
| 2.6% | 1.7% | 4.1% | 3.5% | 2.8% | 5.5% |
| Mining |
| -2.1% |
| -4% | -5.5% | -0.1% | 5.5% | 2% | -3.3% |
| Electricity |
| 6.4% |
| 5.2% | 2.4% | 5.5% | 3.9% | 1.9% | 9.1% |
| Cons Non Durbl |
| 5.3% |
| -1.4% | 0.3% | 10.1% | 1.1% | 5.8% | 13.8% |
| Interm Goods |
| -2.5% |
| -0.1% | -1.1% | 9.4% | 1.8% | 1.9% | -1.5% |
The market was prepared for the worst, maybe more degrowth but definitely not anything good. And once again the Jan IIP numbers baffled everyone, coming in at 2.4% v/s wide expectations of around 1.5%. The growth was driven by electricity, coming in at 6.4%, the highest over the last few quarters. But capital goods continues to trail downwards and manufacturing showed a little bit of improvement at 1.1% v/s a degrowth in Dec. Consumer non durable improved dramatically, from a negative 1.4% in Dec to a growth of 5.3% in Jan.
Though the data was encouraging, the “good feeling” was short lived as the consumer price index-based (CPI) inflation for February rose to 10.9%, the third successive month when it has been above the psychological mark. And this rising inflation, was mainly on account of higher food prices and less on account of fuel prices.
This rising inflation is a dampner because it now dims the hope of RBI bringing in a rate cut on 19th March. Growth in Jan was better and a rising CPI now means that Subbarao will continue to maintain his hawkish stance on prices and sit tight on rates. As such it would be naïve to have expected a rate cut at this juncture and this inflation data just goes on to reiterate his stand.
What we are seeing is a broad based slowdown. There is no major pick up on supply and thus food being at these levels is not a surprise. Manufacturing inflation is there, cost of manufacture has gone up but most are not able to pass on the costs to the consumers as demand, as such is low. Looking ahead, the rupee and the crude trajectory would be critical. It is really frustrating that despite RBI going behind inflation with such vengeance, it just refuses to relent and growth has become the sacrificial lamb in this fight to curb inflation. But then again, if probably RBI had not been as aggressive as it has been, maybe growth as such would have suffered as inflation would then have shot through the roof, affecting demand.
In FY13, growth has bottomed out in Q3 and maybe we could see pick up from Q4, albeit very marginal. And the two quarters for FY14 would be revised due to base effect but we could see uptick from H2.
Let us just hope that what we are seeing now is the last of the bottoming out and soon, in a few months we could see some uptick.
All eyes are now on the Credit Policy but expectations are not too high.