IIP De-grows, CPI Grows

The Indian economy is seriously lacking on the growth front. It stands vindicated from the fact that, the latest Index of Industrial Production (IIP) numbers for the month of December 2012 came in at -0.6% on a YoY basis. The numbers came in further lower as data for the month of November 2012 stood at -0.1%. The cumulative growth for the period April-December 2012-13 came in at 0.7% over the corresponding period last year.

The three major sectors namely Manufacturing (accounts for 75.52% of the total index weight), Mining (14.15%) and Electricity (accounting the remaining 10.31%) witnessed a mixed growth rate for the month of December 2012. Manufacturing remained muted with de-growth of 0.7, while Mining activity witnessed a negative growth of 4%. On the other hand, Electricity sector grew by 5.2% in the quarter.

Today there was also a release of Consumer price Index (CPI) numbers for the month of January 2013. The CPI Inflation is considered more relevant as it captures ground level prices which directly impact the consumers’ purchasing activity. For the month of January 2013, the number came in higher by 23 basis points at 10.79% as compared to 10.56% in the month of December 2012.

In the recent past, CSO has estimated that the GDP growth for FY13 would be 5%, which is lowest in the decade. However, the Finance Minister P Chidambaram remains optimistic and expects the growth to be 5.5% for this fiscal. From the dismal IIP numbers for the October (one off due to festive season), November and December of 2012 standing at 8.4%, -0.1% and -0.6% respectively, prima facie suggest that the GDP numbers for Q3FY13 would also be disappointing. GDP for Q1FY13 came in at 5.5% while for Q2 it came in lower by 20 basis points to 5.3%. We believe that the GDP growth would probably be around or below 5.3% for Q3FY13, dragging the overall growth for the fiscal.

In the past six months, the FM has done his best and has given a nod to some of the reformist measures to revive the animal spirits in the economy. However all eyes are now on the Budget 2013-2014 and the market and economy will shape up according to the Budget announcement. Nevertheless, we would be updating investors on the same and would therefore request you to visit our website (especially the mindshare and Budget page) regularly.