IIP - January 2013 - Eastern Financiers

Boosted by a pick-up in domestic demand and infrastructure output at three-month high, Industrial production for the first month of 2013 clambered above market anticipation of around 1.2% to 2.4%. Industrial Production that expanded for the first time in last three month's-was way above last month's negative growth of 0.6%. However, the decline in industrial output for December 2012 has been revised slightly upward to 0.5% from a contraction of 0.6% last month.

Output in the country's eight key infrastructure industries, widely known as the core sector and accounting for almost 40% of factory production grew an annual 3.9% in January-its fastest in three months. Production in four of those eight industries - coal, steel, electricity and refinery products, which account for a little over a fourth of the IIP - rose in January and likely had a bearing on the overall industrial production. HSBC manufacturing PMI surveys also reflected domestic orders have boosted Indian factory activity so far this year. However, cumulative IIP growth over the April-Jan period of FY13 stood at a percent against 3.4% growth clocked during the same period last fiscal.

January IIP data showed Manufacturing and Electricity picked up momentum, but performance of Mining and Capital Goods continued to be circumspect. Manufacturing output which accounts for the bulk of industrial production and contributes about 15% to the overall GDP inclined 2.7% in January from a year earlier. Manufacturing in January 2012 swelled by 1.1%.

Capital goods output, a key investment indicator slipped 1.8% in January. The sector has grown just once in the last ten months. Production of consumer goods, however, recovered, posting growth of 2.8% during January 2013. Mining continued to contract by 2.9% during January. India's economy has been hamstrung by weak capital investment and flagging consumer demand. A series of government policy U-turns and a slowdown in the rate of implementing key industrial and infrastructure projects have added to investor gloom.

During the April-January period of FY13, growth in the capital goods segment contracted massively by (9.3)% as against dip of (2.3)% in April-January period of FY12. The key manufacturing sector also registered marginal growth during the Apr-Jan period of FY13 to just 0.9% against growth of 3.7% in the same period last fiscal. Mining that has around 14% weightage in the IIP index contracted during the first ten months of the fiscal 2013 by 1.9% against de-growth of 2.5% in the April-January period of FY12.

With gloomy GDP growth for the third quarter at 4.5% that was the slowest since the first quarter of 2009 on one hand, and pick up in retail inflation which persisted to be above the 10% mark for the third consecutive month along with recuperated Industrial growth on the other-these have added a level of uncertainty ahead of the central bank's policy review next week on 19th March.

Source : Equity Bulls

Keywords