*OCT IIP – A DIRTY PICTURE! * *By Ruma Dubey*
Circa Oct 2010: There was immense festive cheer and that was amply reflected in the IIP numbers. It had grown at its fastest pace in three months in October 2010, beating economists' estimates and driving away concerns over a slowdown in economic activity. Oct 2011: There entire IIP report card is painted red and there is only contraction all around, with only electricity in the green. What happened to the festivities this year? Infact consumer durables, which is usually good in Oct has also contracted. A shocker of a number indeed! *PARTICULARS* *Oct’11* *Sept’11* *Aug ‘11* *YoY* *IIP* -5.1% 1.9% 4.1% 11.3% *Consumer Durable* -0.3% 8.7% 4.6% 14.2% *Manufacturing* -6% 2.1% 4.5% 12.3% *Capital Goods* -25.5% -6.8% 3.9% 21.1% *Basic Goods* -0.1% 4.5% 5.4% 9.8% *Mining* -7.2% -5.6% -3.4% 6.1% *Electricity* 5.6% 9% 9.5% 8.8% *Consumer Non Durable* -1.3% -1.3% 2.9% 5% *Intermediate Goods* -4.7% 1.5% 1.3% 9.7% Manufacturing output contracted to -6% and Oct is usually the best month for mining but given the issues faced by the sector today, it comes as no surprise to know that it has contracted to -7.2%. Capital goods sector contracted to -25.5%. The only positive was electricity which grew at 5.6%. Clearly, we cannot expect the industry to run now without any policy action. This is very disappointing and though one expected a decline, it was not expected to be so low. The moment the numbers came in the index slipped into the red and the capital good stocks – L&T, BHEL, BEML, Punj Lloyd and entire bandwagon plunged. What will RBI do now? Its primary concern remains inflation and data is expected to come in on 14th Dec. That number could decide the policy decision which RBI could make on 16th Dec. Interest rates going up is ruled out but given the all-round contraction, there is expectation that maybe a CRR cut is now fully justified. But it is not as much about money supply as it is about lack of any policy action. Banks are holding excess SLR to the tune of 29%. CRR cut is not expected to come. Thus at this juncture, RBI will take a pause, a full pause. So the only good news is that we do not see any more rate hikes; the rate hike cycle is done with! The bad news – growth is pretty precarious and unless action is seen - on mining, on coal, on bringing about a mood of optimism in the country, unless structural issues are cleared, we could continue slowing down further. The negative growth in all goods – basic, intermediate, consumer durable, consumer non durables, all indicate a breakdown in consumer confidence. Thus apart from tackling structural issues, the Govt needs to work on building up confidence of the people, which if could be measured today, would have been at a negative too. -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
