April IIP At 2%

The Industrial Production (IIP) has disappointed the equity markets yet again. The April 2013 IIP reading has come in at 2% against an expectation of 2.6%, indicating a further fall in the industrial production.

The mining sector, which has been hit due to the mining ban in a few states and lower demand, has shrunk further by 3% in April 2013. In FY13, the mining sector reported a decline of 2.8%. The manufacturing sector reported negative growth rate in the last fiscal but has grown by 2.8% this time. The electricity sector which has been hit by fuel shortage and lower tariffs has managed to remain positive with growth of 0.7%.

The basic goods industry, during the month, has reported 1.3% growth, while capital goods have reported a flat growth at 1%. Intermediate goods have reported a growth rate of 2.4%. Consumer durables reported a decline of 8.3% while Consumer non-durables reported a growth of 12.3%. Overall, growth in consumer goods remained at 2.8% for April 2013.

During the quarter, some industries like PVC Pipes and Tubes, Apparels, Cable, Rubber, Three-wheelers, Gems and Jewellery have shown robust growth. Gems and Jewellery, however, may show some moderation after the RBI cracked down on gold imports.

Industrial sectors such as cigarettes, copper and copper products, boilers, heat exchangers, sugar machinery, plastic machinery etc. have reported a steep decline in growth during the month.

Overall, the industrial growth is not too robust and is below expectations. The IIP, being a barometer of the industrial growth, a disappointment is worrying. A steep depreciation in the rupee may hamper growth further as higher fuel cost would eat the margins of businesses.