Feb 2013 IIP Betters Expectations At 0.6%, CPI Eases

The Index for Industrial Production for the month of February 2013 has come at 0.6%, beating the expectations of economists, private surveys and experts, who were largely expecting a contraction in the data. This number came in at 2.4% in January 2013, while it stood at 4.3% in February 2012.

The Ministry of Statistics and Programme Implementation (MOSPI) has also announced the Consumer Price Inflation (CPI) numbers for March 2013 today. This came in at 10.39% for March 2013 against 10.91% in February 2013. The number is less compared to the indication in the previous months that inflation is easing to single digits.

Though the data has come in higher than expectations, the markets have not shown any positive impact after the poor fourth quarter results posted by Infosys earlier in the morning.

IIP

So, is there anything good at all in the IIP? Well, the Capital Goods sector has shown some strength, though this does not exactly show how the capex cycles are moving. In fact, there are worries that the power equipment sector is not showing any movement in the right direction. Basis and intermediate goods, on the other hand, have shown a decline.

Consumer Goods and Consumer Durables have shown moderate growth while Consumer Non-Durables have shown a negative growth.

Among the industries, growth in the mining sector is shrunk by 8.1%, while the electricity sector has also reported a negative 3.2%. Manufacturing, though, has seen 2.2% growth.

Overall, though the IIP numbers were better than expectations, the April to February numbers indicate that the industrial growth in the country is nearly stalled. Corrective measures need to be taken on an immediate basis to improve investor sentiment.

CPI

The Consumer Price Index (CPI) has shown some easing in March 2013. The CPI for March 2013 stood at 10.39% compared to 10.91% in February 2013. The inflation in the Rural and Urban region has also shown easing. The lower inflation was due to the easing in the prices of vegetables and protein-based items.

The highest inflation was seen in cereals and products, which stood at 17.55%. The prices of milk and spices grew by 7.7% and 5.12% respectively.

The ease in the CPI has set the stage for the WPI numbers, which will be announced in the next week. Though there is some easing, the double-digit CPI data still remains a concern for the market.

Possibility Of A Rate Cut?

The lower IIP has again opened out talks of the RBI considering a rate cut. The RBI has cut the rates twice in this calendar year (0.25 points in both instances), but has said that the room for further cuts remains limited. Considering the flat IIP numbers and lower inflation, the markets may look at a rate cut of a minimum 25 bps. However, we at DSIJ do not expect any rate cut in the apex bank’s next meet scheduled on May 3, 2013.


- All numbers in the image indicate per cent growth (decline) on year on year basis