Posted at 12:30 PM , on December 14, 2016
The IIP for the month of October 2016 came in sharply lower at -1.9% on a YOY basis. The pressure obviously comes from the manufacturing sector because the core sector has shown good growth in the month of October. What is pertinent is that this refers to the period before the pressure of demonetization started on November 09th. That means IIP numbers may come under further pressure in the months of November and December. The chart below depicts the relationship between IIP, Manufacturing Growth and the Core Sector growth over the last 18 months… Continue reading
Posted at 2:41 PM , on December 5, 2016
The core sector number for the month of October 2016 was announced by the Department of Economic Affairs on 30th November. The core sector consists of 8 key sectors that form the backbone of the economy and include; Steel, Cement Fertilizers, Crude Oil, Natural Gas, Refinery output, Electricity and Coal. The reason the core sector is important is that it constitutes 38% of the index of industrial production (IIP) and therefore tends to lead the IIP with a time lag. More importantly, the core sector number has strong externalities. The increase in production of sectors like steel, electricity and coal has a multiplier effect on the economy. Changes in any of these variables have a proportionately higher impact on the GDP… Continue reading
Posted at 4:51 PM , on March 16, 2015
The data on the Consumer Price Index (CPI) and Index of Industrial Production (IIP) have raised some concerns over the India growth story during this week. Inflation was above expectations and IIP was lower than anticipated. More than the numbers, it is the components that raise some serious concerns about growth and inflation. Let me explain!
CPI is up to 5.37% …
The CPI number came in at 5.37% in February versus 5.19% in January 2015. This higher CPI was largely driven by the food component. There are two key points to note here. Firstly, higher food prices were responsible for higher inflation. This was largely an outcome of unseasonal rains which had a negative impact on the Rabi crop. With unseasonal rains likely to continue, as per Met forecasts, this situation could worsen. Secondly, the Rs.3 hike in petrol and diesel prices will also show up next month. Something for the government to really worry about! Continue reading