The IIP numbers for December indicate what we all were kind of looking for – the economic growth is slowly but surely getting broad based. After six straight months of contraction, the IIP finally turned the corner and came in positive.
IIP for the month came in at 1% v/s (-)0.3% YoY and v/s (-)1.9% on MoM. So, based on both the base effects – YoY as well as MoM, the IIP was as such expected to come pretty where it came in today. That’s a relief. The overall positive growth in manufacturing mainly on the back of base metals, pharma and petrochem products, the IIP climbed back slowly into the green.
All industrial goods – capital goods, consumer durables and non-durables and infra and construction goods were all in the positive except, primary goods, which continued to show contraction.
Electricity did the best, growing 5.1% while the worst contraction was in mining at (-)4.8%. Manufacturing grew at a steady 1.6%.
On the other hand, CPI for the month of January eased to 4.06% v/s 4.59% (MoM) – this is a 16-months low. This again was on the back of a much lower food inflation at 2.67% v/s 3.87% (MoM). The drop in vegetable prices was huge at (-)15.84% v/s (-)10.41%. Seasonally, these winter months of the year, the vegetables prices are usually low and will remain so for a month or two more.
As we go ahead, it is fuel which could become the dampener as cost of petrol and diesel are very close to hitting the Rs.100/liter mark and this could lead to an overall rise in inflation all-around.
So, we end the week with a higher-than-expected growth in IIP and lower-than-expected CPI. This bodes well as it points to an economic recovery and hopefully, with the Govt tackling with the supply-side issues, we will be out-of-the-woods and post sustainable economic recovery. Well, we might have a positive GDP too, maybe by Q4. Now, that is something to look forward to.