IIP growth falls to 1.82% in Dec'11
Industrial production grew by 1.82 in Dec11 against expectations of 2.7%. Correspondingly, growth during Nov11 was at 5.95 and Dec10 was at 8.13%. The robust IIP numbers during Nov11 raised expectations of growth being back on track. However, the impact of high rawmaterial prices & borrowing cost is still affecting the manufacturing sector growth. Inspite of the fall in international commodity prices, domestic raw material prices continue to remain elevated because of the sharp depreciation in INR last year. Even policy rates continue to remain at their peak as RBI is waiting for inflation to fall within its projected levels. The next policy meet is on 15th Mar’15 and the reserve bank may cut rates if inflation remains within its projected trajectory.
The general index stood at 178.8, up by 6.8% m-o-m and 1.8% y-o-y. Amongst the broad sectoral classification, mining, manufacturing & electricity sector reported a growth of -3.7%, 1.8% & 9.1 respectively. Contributed to IIP growth by mining, manufacturing & electricity was -29.9%, 77.2% & 52.8% respectively. Within the manufacturing sector, 15 industry groups (out of total 22) reported a positive growth y o-y. On use based classification, highest growth was reported by consumergood (10.0%) followed by basic goods (4.0%). Intermediate (-2.7%)declined again after remaining nearly flat in Nov’11. Capitalgoods (-16.5%) continue to report contraction for the 6th consecutive month. The 8 core sectors, having weight of 37.9% in IIP, grew by 3.3% in Dec’11 against 6.8% in Nov’11 and 6.2 in Dec’10. The core sector contributed 68.2% in overall IIP growth.
The slower than expected growth in IIP growth may affect investor’s confidence amidst the fragile geo political scenario. GDP growth expectation for FY12 has also been scaled down to 6.9% lastweek. However, positive indications are still there from the PMI survey results. PMI index surged to 57.5 inJan’12 from 54.2 in Dec’11. We expect better IIP growth in the remaining months of this fiscal which may drive full year growth figures upwards.
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