MARCH IIP - A SLOW, TEDIOUS CLIMB UP BEGINS
By Ruma Dubey
| PARTICULARS | March’13 | Feb’13 | Jan’13 | Dec’12 | Nov’12 | Oct’12 | Sept’12 | YoY |
| IIP | 2.5% | 0.6% | 2.4% | -0.6% | -0.1% | 8.2% | -0.4% | -2.8% |
| Cons Durable | -4.5% | -2.7% | -0.9% | -8.2% | 1.9% | 16.5% | -1.7% | 1.2% |
| Manufacturing | 3.2% | 2.2% | 1.1% | -0.7% | 0.3% | 9.6% | -1.5% | -3.6% |
| Capital Goods | 6.9% | 9.5% | -1.8% | -0.9% | -7.7% | 7.5% | -12.2% | -20.1% |
| Basic Goods | 2.6% | -1.8% | 3.4% | 2.6% | 1.7% | 4.1% | 3.5% | 1.1% |
| Mining | -2.9% | -8.1% | -2.1% | -4% | -5.5% | -0.1% | 5.5% | -1.1% |
| Electricity | 3.5% | -3.2% | 6.4% | 5.2% | 2.4% | 5.5% | 3.9% | 2.7% |
| Cons Non Durbl | 6.5% | 2.9% | 5.3% | -1.4% | 0.3% | 10.1% | 1.1% | 1% |
| Interm Goods | -0.2% | -0.7% | -2.5% | -0.1% | -1.1% | 9.4% | 1.8% | 0% |
IIP for March, for the third consecutive month came in higher and it is at a 5- month high. The last time we had seen a good growth was in Oct’12 where IIP was at 8.2%. The best part of the numbers this time around was the pick-up in the manufacturing growth. MoM, Manufacturing rose from 2.2% to 3.2% and YoY, from a contraction of 3.6%. In fact, manufacturing also is at a 5-month high. Consumer durables continues to languish and it is worse on YoY as well as MoM.
And the story of capital goods continues to remain volatile. Two months in a row it has come in the positive. But this is more of a rogue number as the basket which comprises the capital goods is pretty skewed, not giving us the right picture. Capital goods include cables and wires, metal ancillaries, rubber and plastic goods, among others and like every month, data continues to remain volatile. In fact, the biggest contributor to the capital goods sector in March was rubber and cables showed a whopping 247.3% growth.
At the same time, take a look at the sectors which have done well in the manufacturing sector. 10 out of the 22 industry groups in the manufacturing sector have shown positive growth during the month of March 2013. The highest growth was shown by the apparel, dressing and dyeing of fur sector – up 152%.
But these are the only official and indicative data which we have to work on. More importantly, RBI also relies on the very same data. Thus working on what we get, without worrying too much about the quality of data, the March IIP looks better. It is not yet time for celebration. We are now getting into a phase of consolidation and remember, the lower base effect will continue to help the figures look good. Over the next few months, at least for six more months, growth will be sluggish and in the lower single digit numbers. Balance sheets are stretched to the limit and there are very high levels of NPAs. Thus expecting things to change overnight or even in the immediate short run would be naïve.
Putting things into perspective were the auto sector numbers put out by Society of Indian Automobile Manufacturers (SIAM), which for April showed a 10.43% (YoY) decline in domestic car sales – the sixth consecutive month of falling sales and motorcycle sales declined 2%. SIAM expects positive growth returning to the sector only after 3-4 months.
On the other side, PNB yesterday stated that it was looking at cutting rates and IDBI announced a cut in deposit rates by up to 50 basis points (bps) in select maturities. Looks like RBI managed to hold its steed and banks are toeing the line.
Yes, things are not very good at the moment but it also getting a bit better – the ‘getting better’ part is much slower than the ‘not very good part’. Policy inaction and political uncertainty will continue to dominate the moods in the coming months.