IIP For April At 0.1%, Muted Start For FY13

DSIJ Intelligence / 12 Jun 2012

The first month data for the fiscal year 2013 came in at a subdued of 0.1 per cent. The data came in below the street expectation of 1.2 to 2 per cent.
One of the key data - the Index of Industrial Production (IIP) - was released by the Minister of Statistics and Programme Implementation (MOSPI) today. The first month data for the fiscal year 2013 came in at a subdued of 0.1 per cent. The data came in below the street expectation of 1.2 to 2 per cent. One should note that it was actually better than the data for the month of March which had seen a negative growth of 3.5 per cent.
 
As soon as the data was realised by the MOSPI the markets witnessed some pressure and moved southwards a few points but recovered thereafter, closing the day with gains of more than 1 per cent. This was on the back of hopes that the RBI might take a dovish stance in its monetary meet which is scheduled for Monday, June 18, 2012. Further, the cumulative growth for the period April – March 2011-12 stands at 2.8 per cent as against the corresponding period of the previous years.

For the month of April 2012, mining showed a negative growth of 3.1 per cent as against the same period last year while the manufacturing and electricity sectors for the month of April 2012 posted growth of 0.1 cent and 4.6 per cent. As many as 12 out of the 22 industry groups in the manufacturing sector have shown positive growth during April 2012. Further, the capital goods output declined by 16.3 per cent as against 6.6 per cent growth in the same period of the previous year.     
 
According to media reports, after the release of the IIP data the finance minister expressed his disappointment over the dismal industrial growth. The FM said that his ministry would take steps to beam positive signals to the industry. Also, Pratip Chaudhuri, chairman of India’s largest bank viz. the State Bank of India, said that he expects the RBI to cut the cash reserve ratio by 1 per cent to ease the liquidity situation. 

Overall, things are rather very dull with the rupee deprecating against the dollar (at present trading at around Rs 56 per USD), concerns over the current and fiscal account deficit and the rampant inflation acting as speed-breakers on the road of growth for the Indian economy. The macro-economic environment continues to remain under pressure with the U.S. not showing clear signs of recovery and the euro zone sovereign debt crisis continuing to persist. The policy-paralysed government has again passed the ball into the RBI’s court and the street expects some bold move (like reducing CRR or repo or both) from the governor to help the growth-hungry economy be back on track. 

One has to watch out for the WPI numbers which are going to be released on June 14, 2012, which will provide some cues for the market and also for the RBI in its decision making process. The IIP data for the month of May 2012 would be released on July 12, 2012. However, we believe that inflationary pressure will continue to persist over the economy and we expect the RBI to maintain its status quo at its monetary meet. 

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