JUNE IIP - DEGROWTH, DISAPPOINTING, DISTURBING
| PARTICULARS |
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| June’13 | May’13 | April’13 | March’13 | Feb’13 | Jan’13 | Dec’12 | Nov’12 | Oct’12 | YoY |
| IIP |
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| -2.2% | -1.6% | 2% | 2.5% | 0.6% | 2.4% | -0.6% | -0.1% | 8.2% | -2% |
| Cons Durable |
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| -10.5% | -10.4% | -8.3% | -4.5% | -2.7% | -0.9% | -8.2% | 1.9% | 16.5% | 9.1% |
| Manufacturing |
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| -3.2% | -2% | 2.8% | 3.2% | 2.2% | 1.1% | -0.7% | 0.3% | 9.6% | -2.2% |
| Capital Goods |
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| -6.6% | -2.7% | 1% | 6.9% | 9.5% | -1.8% | -0.9% | -7.7% | 7.5% | -27.7% |
| Basic Goods |
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| -1.9% | -0.4% | 1.3% | 2.6% | -1.8% | 3.4% | 2.6% | 1.7% | 4.1% | 3.6% |
| Mining |
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| -4.1% | -5.7% | -3% | -2.9% | -8.1% | -2.1% | -4% | -5.5% | -0.1% | -1.1% |
| Electricity |
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| 0 | 6.2% | 0.7% | 3.5% | -3.2% | 6.4% | 5.2% | 2.4% | 5.5% | 8.8% |
| Cons Non Durbl |
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| 5% | 1.7% | 12.3% | 6.5% | 2.9% | 5.3% | -1.4% | 0.3% | 10.1% | -0.5% |
| Interm Goods |
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| 1.1 | 1.5% | 2.4% | -0.2% | -0.7% | -2.5% | -0.1% | -1.1% | 9.4% | 0.9% |
By Ruma Dubey
We already knew that growth was hurting. The dismal month after month auto sales numbers, the poor show by India Inc in Q1 and overall data emerging from almost sectors spelt slow down. The June IIP number only went on to reconfirm what we already knew. Thus in that context, there was nothing new about a falling IIP, it was only confirmation. Retail inflation was marginally lower but food inflation at 11.24% in June v/s 11.84% in May made things even more uncomfortable. A marginal decline is fine but it remains stubbornly in the double digits and that is worrying.
July IIP shrunk by 2.2% and Consumer Price Index (CPI) came in at 9.64% v/s 9.87% in June. It was a shocker, like the one last month but a tad better because everyone had really lowered their expectations. This means that for the first quarter of FY14, April to June’13, we are looking at a degrowth of 1.1%.
The items which have shown the maximum negative growth during this month are cigarettes, grinding wheels, copper metal cathode, boilers, heat exchangers, earth moving machinery, sugar machinery, plastic machinery including moulding machinery and gems and jewellery. And items which have shown growth or are in the positive are rice, aerated water and soft drinks, apparels, leather garments, Di Ammonium Phosphate, ethylene, polypropylene, vitamins, PVC pipes and tubes, cable and rubber insulate and three wheelers.
Prior to this, in the afternoon, trade account deficit numbers had come in and that brought in some cheer. After two consecutive months of fall, exports grew 11.64% at US$ 25.83 billion in July. This was mainly on account of increased demand from Africa, Asean and Far East regions. Imports fell 6.2% at US$ 38.1 billion and this was mainly on the back of stable, not increased demand for gold and silver imports. Thus trade deficit was lower for July at US$ 12.2 billion v/s US$17.47 billion (YoY). It is indeed good that the Govt changed the timing of release of IIP data to after market hours or else these dismal numbers would have overshadowed the fall in trade deficit, which at least helped the market end the day in the green.
Rupee has taken center stage and it will remain the leading hero in the next few days to come, till some semblance of stability returns to the rupee. And this semblance will depend on the easing of QE; till that uncertainty remains, rupee will remain the main hero, with growth and inflation becoming sidekicks in this unfolding horror movie. All moves made currently, by RBI and by the Finance ministry will be about curbing the rising rupee. Thus from a time when we were talking about RBI reversing the interest rate cycle, we may have to brace ourselves for some interest rate hikes.
How do we get corporate confidence up? That has to be the biggest question and not whether or not RBI will reduce or increase rates. RBI has been doing its job very well, with absolute diligence but the laggard causing this failure is obviously the Govt. Very real supply constraints have developed like in infra, mainly land acquisitions which does not require big bang reforms. The fall in manufacturing is alarming and this is a direct consequence of the fall in investments and many projects getting stalled.
Globally, things are slowly but surely improving but currently our domestic issues are more taxing. So we can no longer blame it all on global factors. The Govt needs to wake up and realize that we have major domestic issues and if these are not addressed as soon as possible, along with global factors, the issues could manifest into a long protracted period of pain. Mere rhetorics on TV by Finance Minister will tantamount to nothing unless followed up with prompt policy actions to boost the domestic demand. And as such, Mr.Chidambaram did not really announce anything enthusing, so we are back to the rupee and disappointing markets.