IIP grows at 2.4% in January 2013

IIP grows at 2.4% in January 2013

·         In January 2013 the Index of Industrial Production (IIP) rose by 2.4%, which was above the market?s estimate. The growth was contributed by a better than expected performance from the manufacturing and electricity segments. The IIP growth for December 2012 has been revised marginally upwards to -0.5% from the provisional estimate of -0.6%. Therefore, based on the three-monthly moving average, the IIP growth for January 2013 stands at 0.4% as against 3.2% in January 2012.

·         The manufacturing sector, which constitutes about 76% of the IIP, showed signs of recovery as it increased by 2.7% year on year (YoY) as against the decline of 0.7% YoY witnessed in December 2012. The mining output remained bleak as it declined by 2.9% in January 2013. But the electricity output witnessed a growth of 6.4% vs a growth of 5.2% in December 2012. In the use-based category, the basic goods and intermediate goods increased by 3.4% and 2.0% respectively. The consumer goods grew by 2.8% as compared with a decline of 3.6% seen in December 2012. The capital goods segment showed a decline of 1.8% YoY as compared with a dip of 0.6% in December 2012. 

·         On a sequential (month-on-month [M-o-M]) basis, the IIP increased by 1.3% in January 2013 to an absolute figure of 181.8 (179.4 in December 2012). The manufacturing, mining and electricity segments increased by 1.3%, 1.4% and 2.0% month on month (MoM) respectively. In the use-based category, the basic goods increased by 1.8% MoM whereas the consumer goods segment reported a 3.6% M-o-M increase led by a 4.1% M-o-M increase in the consumer durable goods segment. However, the capital goods segment reported a decline of 3.8% on an M-o-M basis.

·         The IIP growth numbers have re-entered the positive territory after a gap of two months, led by a pick-up in the manufacturing segment. Based on the three-monthly moving average, the IIP growth is +0.4% but it may improve going ahead. While the decline in the trade deficit (in February 2013) gives some comfort, the rise in the Consumer Price Index (CPI) inflation could prevent aggressive monetary easing by the Reserve Bank of India (RBI). However, the market expects the RBI to reduce the repo rate by 25 basis points in the coming mid quarter policy review (on March 19, 2013) in view of the slowing economy and the tight fiscal deficit targets set by the government in the Union Budget for 2013-14. 

Report from Sources

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