SEPT IIP – MANUFACTURING IS THE SILVER LINING

By Ruma Dubey

The IIP for Sept’17 came in at 3.8% much below what most had expected, especially given the fact that this was expected to be a good month, given the stocking that would have happened for the festive season.

The heartening fact to note here is that manufacturing has picked up and so has capital goods. This co-relates to the good earnings that we have been seeing this Q2. Today’s numbers of SBI were good and most of the PSU banks, which have declared numbers show that asset quality deterioration is slowly correcting and the corporate deleveraging is most certainly happening.

The trimming of the GST list today was also good news. It is pretty foolish to say that the Govt is rolling back its list; GST will be an ongoing process over the next 2-3 years and these additions and deletions will happen; it is only after a couple of years that GST is going to stabilize.

Coming back to the IIP, eleven out of the twenty three industry groups in the manufacturing sector have shown positive growth in Sept (YoY). Manufacture of pharmaceuticals, medicinal chemical and botanical products has shown the highest positive growth of 26.4% in Sept, followed by 13.2% in computer, electronic and optical products and 13.1% in motor vehicles, trailers and semitrailer’. On the other hand, the industry group ‘Other manufacturing’ has shown the highest negative growth of (-) 27.1% followed by (-) 23.1% in manufacture of tobacco products and (-) 19.2% in manufacture of electrical equipment’.

Some important items showing high positive growth during the current month over the same month in previous year include ‘Separators including decanter centrifuge’ (117.4%), ‘Bodies of trucks, lorries and trailers’ (94.5%), ‘Steroids and hormonal preparations (including anti-fungal preparations)’ (66.7%), ‘Meters (electric and nonelectric)’ (58.5%), ‘Digestive enzymes and antacids (incl. PPI drugs)’ (51.2%), ‘Axle’ (50.6%), ‘Fragrances & Oil essentials’ (46.0%), ‘Anti-pyretic, analgesic/anti-inflammatory API & formulations’ (41.2%), ‘Vaccine for veterinary medicine’ (34.3%), ‘Telephones and mobile instruments’ (28.8%) and ‘Films of polythene, polyester, PVC & other forms of plastic’ (25.3%).

Some important items that have registered high negative growth include ‘Electric heaters’ [(-) 95.2%], ‘Anti-malarial drug’ [(-)76.9%], ‘Jewellery of gold (studded with stones or not)’ [(-) 67.7%], ‘Plastic jars, bottles and containers’ [(-) 61.9%], ‘API & formulations of hypo-lipidemic agents incl. anti-hyper-triglyceridemics (e.g. simvastatin, atorvastatin, etc); anti-hypertensive’ [(-) 44.6%], ‘Other tobacco products’ [(-) 36.1%], ‘Electrical apparatus for switching or protecting electrical circuits (e.g switchgear, circuit breakers/switches, control/ meter panel)’ [(-) 31.5%], ‘Cement Clinkers’ [(-) 30.7%], ‘Printing Machinery’ [(-) 30.2%], ‘Tooth Paste’ [(-) 26.9%], ‘Palm Oil refined (including Palmolein)’ [(-) 21.9%], ‘Tea’ [(-) 21.0%] and ‘Plastic components of packing/ closing/ bottling articles & of electrical fittings’ [(-) 20.7%].

The IIP details (MoM):

IIP 3.8% v/s 4.5%

Manufacturing 3.4% v/s 3.1%

Mining 7.9% v/s 9.4%

Electricity 3.4%v/s 8.3%

Consumer durable goods -4.8%v/s 1.6%

Capital Goods 7.4% v/s 5.4%

Intermediate goods 1.9% v/s -0.2%

Infra construction 0.5% v/s 8.7%

Consumer non-durables 10% v/s 6.5%

Primary Goods 6.6% v/s 7.1%

Inflation for Oct will come in on Monday and that will be closely watched. Commodity prices are inching upwards and in the months to come, inflation could once again take center stage. RBI is meeting on the 6^th of December and expecting a rate cut or any action at this juncture, especially with oil on the boil would be too naïve.