APRIL IIP AND MAY CPI - PLEASANT SURPRISE TO BRING GOOD CHEER

By Ruma Dubey

This was like a pleasant surprise, almost seemed like the ‘Modi effect’ rubbing onto the IIP numbers as well, even before he has started doing anything!

As against wide spread expectations of IIP for April coming in at around 1.3-1.5%, the IIP came in at 3.4% v/s 1.5% in previous April and a much far cry from the degrowth of 1.3% in April’12. This was led by the fantastic growth seen in electricity and capital goods. The growth in electricity is probably led by the growth in core sector, led by recovery in the output of electricity, coal and crude oil. But looking at the sweltering heat and the major power cuts in Northern India, one cannot help but wonder how did electricity grow so much when we are staring hard at a deficit.

In terms of industries, 14 out of 22 industry groups in the manufacturing sector have shown positive growth during the month of April 2014 as compared to the corresponding month of the previous year. The industry group ‘Electrical machinery and apparatus n.e.c.’ has shown the highest positive growth of 66.0%, followed by 9.6% in ‘Machinery and equipment n.e.c.’ and 9.1% in ‘Tobacco products’. On the other hand, the industry group ‘Radio, TV and communication equipment & apparatus’ has shown the highest negative growth of (-) 31.6%, followed by (-) 22.1% in ‘Wearing apparel; dressing and dyeing of fur’ and (-) 14.6% in ‘Motor vehicles, trailers & semi-trailers’.

Some of the important items showing high positive growth during the current month over the same month in previous year include ‘Cable, Rubber Insulated’ (267.1%), ‘Copper and Copper Products’ (75.4%), ‘Ayurvedic Medicaments’ (70.4%), ‘Sugar (including sugar cubes)’ (53.1%), ‘Leather Garments’ (45.5%), ‘Stainless/ alloy Steel’ (39.4%), ‘Cigarettes’ (31.3%), ‘Steel Structures’ (29.1%), ‘Scooter and Mopeds’ (28.0%), ‘Terry Towels’ (27.7%) and ‘Biaxially Oriented Polypropylene (BOPP) films’ (27.2%).

And those showing high negative growth included ‘Aluminium Conductor’ [(-) 51.1%], ‘Sacking’ [(-) 48.8%], ‘Telephone Instruments (incl. Mobile Phones & Accessories)’ [(-) 36.4%], ‘Cashew Kernels’ [(-) 35.4%], ‘Apparels’ [(-) 27.3%], ‘Antibiotics and its preparations’ [(-) 25.2%], ‘Tea’ [(-) 24.4%], ‘Generator/ Alternator’ [(-) 23.4%] and ‘Commercial Vehicles’ [(-) 22.9%].

Well, the markets are hitting new highs and this is the ground reality – a fledgling growth rate. But apart from the new found love by FIIs for India, what has changed is the sentiments – from hopelessness we are now looking ahead with some hope. Yet it is now time for the new Govt to start showing action, only words will no longer do.

CPI numbers also came in for the month of May - it was at 8.28% v/s 8.59% in April and this was aided by lower food prices. This too comes as a big relief but wait, this does not mean that RBI will now get ready with a pair of scissors to start slashing the interest rates. We have a long way to get there. Along with RBI, we all need to look skywards, to see how the monsoon fares. Let us also understand that the threat of El Nino is very real and if it does make its unwelcome presence felt, it does not bode too well for a country which is so dependent on agriculture. And the effect of a poor monsoon will have a debilitating effect on an already crippled economy. So let’s not be naïve and hope that these numbers of today indicate that all our troubles are set to vanish.

For now, enjoy this pleasant reprieve from bad economic data and look forward to actual economic measures getting underway from the Modi sarkar.