Aug IIP points to continued sluggishness in the economy
Srujani Panda / 12 Oct 2011
As expected by us the Aug IIP has come in at 4.1% on account of the poor performance of the consumer durables sector and a decline in mining output. However the capital goods sector has shown a good performance on a MoM basis as a result of renewed order inflow. During the April-August period this fiscal, IIP growth stood at 5.6%, as against 8.7% in the same period last year.
| Particulars | IIP Nos. | ||
| 11-Aug | 10-Aug | 11-Jul | |
| Mining | -3.4 | 5.9 | 2.8 |
| Manufacturing | 4.5 | 4.7 | 2.3 |
| Electricity | 9.5 | 1 | 13.1 |
| Basic Goods | 5.4 | 3.8 | 10.1 |
| Capital Goods | 3.9 | 4.7 | -15.2 |
| Intermediate Goods | 1.3 | 5.8 | -1.1 |
| Consumer Goods | 3.7 | 4.6 | 6.2 |
| Consumer Durables | 4.6 | 8.1 | 8.6 |
| Consumer Non-Durables | 2.9 | 1.8 | 4.1 |
| General | 4.1 | 4.5 | 3.3 |
One glance at the above table, confirms that the fall in the Aug IIP numbers suggests continued sluggishness in the economy indicating towards a serious slowdown.
However as far as the markets are concerned, such set of dismal IIP number were pretty much expected and hence has not brought about a heavy sell-off. As mentioned in the morning update growth is expected to remain subdued in the times to come as a result of policy measures undertaken by RBI to arrest inflation by increasing interest rates, which have a lag effect.
Meanwhile, the IIP growth figure for July this year has been revised upward to 3.8% from the provisional estimate of 3.3%. The IIP numbers for May have also been revised upward to a final figure of 6.2% from the earlier estimate of 5.9%.
Now all eyes will turn towards the headline inflation data for the month of September, which is expected to be announced on 14th Oct 2011. As a reminder the inflation data for August was at 9.78%.
India's economy grew by 7.7% in the April-June period, the slowest in six quarters. India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowings, thus hindering fresh investments.
With the economic growth showing serious signs of slowdown, the markets hope that the Sept inflation cools off as this will mean that the RBI might take a pause in its hawkish stance on policy reviews. The RBI is slated to undertake another policy review on 25th Oct 2011 and has hiked interest rates 12 times since March, 2010, to tame inflation but to no avail.
In conclusion, we advice our readers to closely watch the headline inflation data on 14th Oct 2011 as it will provide cues on the RBI’s stance in its 25th Oct 2011 policy review.
Now all eyes will turn towards the headline inflation data for the month of September, which is expected to be announced on 14th Oct 2011. As a reminder the inflation data for August was at 9.78%.
India's economy grew by 7.7% in the April-June period, the slowest in six quarters. India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowings, thus hindering fresh investments.
With the economic growth showing serious signs of slowdown, the markets hope that the Sept inflation cools off as this will mean that the RBI might take a pause in its hawkish stance on policy reviews. The RBI is slated to undertake another policy review on 25th Oct 2011 and has hiked interest rates 12 times since March, 2010, to tame inflation but to no avail.
In conclusion, we advice our readers to closely watch the headline inflation data on 14th Oct 2011 as it will provide cues on the RBI’s stance in its 25th Oct 2011 policy review.
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