IIP used to be a data that evoked a lot of curiosity and then emotions – if the macro data was good the markets went up and if bad, naturally, down.
But after the timing was shifted to 5.30 in the evening to avert this volatility, over a period of time, it looks like IIP has lost the relevance and the reverence it once enjoyed. Its just another data; so much so that the TV channels just have a ticker running on the screen below, with no panel of opinion.
Is this irrelevance of IIP because the timing was shifted to 5.30? Or is it because the data itself, being that of the two months ago has no meaning in this fast changing, uncertain space? It’s a little bit of both – the timing ensured that the data has no connection with the market. And post covid, the YoY data currently seems completely passe; what use is the data when this year there are no lockdowns and the economy has actually opened up?
But let’s not ignore this data on a MoM. Despite the festival season, the IIP for Oct came in at 3.2%, marginally lower than the 3.3% of Sept. This is a very small decline, almost unnoticeable but a decline nevertheless. YoY, it is down from 4.5%. Clearly chip shortage is showing its impact as consumer durables declined by a sharp 6%.
That brings us to the question – are we really seeing a ‘V’ shaped recovery? After a complete lockdown, V-shaped was obviously going to happen but the question is whether this is sustainable? One can blame this on Omicron but nothing has really stopped- no restrictions; factories are up and running and people are working and kids are schooling, some from home, some at school. So, we cannot yet say that the new variant is impacting the economy. Yes, psychologically, it does have an impact but currently, when you move around anywhere in India, one almost feels there is no corona.
What we thus understand from the Oct IIP is that though there is a demand, supply side bottleneck is impacting growth. Capital goods too showed a contraction and that, if we are saying that India is recovering, is not very assuring.
As we move ahead, we most certainly need more specific, job-creating reforms. There is no running away from the fact that jobs have to be created. PLI is a great scheme but we hope that there is consistent follow-up. Some are of the opinion – just to present a pretty balance sheet, should the Govt be selling off PSUs now when jobs are required?
IIP might be data of the past but it still gives us some markers for the future; we know growth has slowed but this puts a number to it. CPI is coming on Monday – now that will be a figure closely watched.