IIP Contracts, While Inflation On A 3 Month High

Yesterday, two important announcements were made, one was the Index of Industrial Production (IIP) and the other one was Consumer Price Index (CPI). The figures were announced after the market hours. The figures show that the IIP contracted for the second month in a row in March, whereas the CPI has surged to three month high in the month of April 2014.

The point of attracting is that the IIP data for the month of March 2014 was 12 month high at 193.2 as compared to 173.1 in February 2014 and 194.2 during March 2013. This means that on yearly basis the IIP contracted by 0.5%. While on cumulative basis, from April 2013 to March 2014 the IIP data has seen a decline of 0.1%. 

Going into the details the mining and manufacturing sector has seen a negative growth of 0.4% and 1.2% respectively. While on cumulative basis from April 2013 to March 2014 the mining and manufacturing segment has also seen a negative growth of 0.8% each, whereas the electricity sector witnessed a growth of 5.4% during March 2014 as compared to corresponding month of previous year. Capital goods segment was the biggest disappointer, showing de growth of 11.25% for March 2014 as compared to the same month of previous year, while consumer goods witnessed a de-growth of 0.9% in March 2014 as against March 2013.

On industry wise 12 out of 22 industries in the manufacturing sector reflected a negative growth in March 2014, as against corresponding month of previous year.  The radio, TV and communication equipment & apparatus has seen the highest negative growth of 33.1%. The industry group that consist of wearing apparel, dressing and dyeing fur showed the highest growth in March which stands at was 26%. The other sector which continued positive momentum during April 2014 was basic metals (up by 9%), food products and beverages (up by 6.2%) etc. as compared to April 2013. 

On CPI front, the Consumer Price Index for the month of April was at 8.59%, up by 28 basis points as compared to March 2014, but on yearly basis the inflation has reduced by 80 basis points. The figures suggested that the inflation in the rural and urban areas has increased by 36 basis points to 9.25% and 18 basis points to 7.69% respectively in April 2014 as compared to March 2014. The fruits and vegetable inflation is still higher with 6.93% and 3.53% respectively during the month of April 2014 as compared to March 2014. Even in the sugar segment, the inflation is high at 2% in April 2014 as compared to March 2014.

From the above we can say that the inflation in the fruits and vegetable sector is rising, this is due to destruction of kharif crop by the adverse weather mainly due to the hailstorm and El Nino effect. This suggests that the inflation in the coming months is going to remain at high.