about 11 months ago
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IIP for June came in at 2% v/s 3.1% in May and it put forth what we all knew all along – the economy is slowing down and slowing down fast.

With the auto sector almost gutted, realty also down in the dumps, these numbers of industrial production, at least as of now seem merely symbolic. The sharp degrowth in capital goods and consumer durables shows the reality we experience. Manufacturing too at 1.2% shows sure signs of a slowdown.

Internals of IIP: (MoM)

Manufacturing 1.2% v/s 2.5%

Capital goods -6.5% v/s 0.8%

Primary goods 0.8% v/s 2.5%

Intermediate goods 12.4% v/s 0.6%

Consumer durables -5.5% v/s -0.1%

Consumer nondurables 7.8% v/s 7.7%

Electricity 8.2% v/s 7.4%

Mining 1.6% v/s 3.2%

In terms of industries, 8 out of 23 industry groups in the manufacturing sector have shown positive growth during the month of June 2019 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of basic metals’ has shown the highest positive growth of 17.7 percent followed by 16.5 percent in ‘Manufacture of food products’ and 10.3 percent in ‘Manufacture of tobacco products’. On the other hand, the industry group ‘Manufacture of paper and paper products’ has shown the highest negative growth of (-) 19.9 percent followed by (-) 14.3 percent in ‘Manufacture of furniture’ and (-) 13.9 percent in ‘Manufacture of motor vehicles, trailers and semi-trailers’.

The five highest positive contributors to the IIP in June were - MS slabs, Electricity, Sunflower Oil, HR coils and sheets of mild steel, Anti-pyretic, analgesic/anti-inflammatory API & formulations. And the five negative contributors were - Bars and Rods of Alloy and Stainless Steel, Diesel, Steel Structurals (including angles, shapes, sections, etc.), Auto components/ spares and accessories and two-wheelers (motorcycles/ scooters).

The RBI on Wednesday what it could do the best but the onus now lay on the Govt; a rate cut can only do so much beyond that, structural issues need to be sorted out and smoothened by the Govt. Also there is a lot of uncertainty, especially on the global front and till that settles, growth will continue to struggle. At this juncture, to say that RBI cutting rates will boost the sagging consumption story would be too far-fetched.

The markets are currently in the positive zone after days of consistent battering and this is on the hope that the FM will soon announce the clarification on the surcharge issued inadvertently on the FIIs/FPIs in the Union Budget, after which the FIIs have turned into aggressive sellers.

Though it was expected that an announcement would come this evening after the FM met with the industry chiefs today, the only assurance which came through – RBI and Govt are on the “same page” and making efforts to boost the economy. The FM assured all that action will be taken “very soon” to boost the sagging economy.

So, once again the market and the Indian industry will wait and watch….Hope the rah-rahing sense of nationalism now gives way to boost the sagging economy. For Kashmir to grow, the rest of India needs to grow first.

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