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IIP growth as per new series slows to 6.3% in April 2011
The Index of Industrial Production (IIP) growth for the month of April 2011 as per the new
series dipped to 6.3% from 8.8% registered in March 2011. As per the old series, IIP
growth was pegged at 4.4% compared to 7.3% growth in March 2011 and Bloomberg
median forecast of 5.5%.
On a sectoral basis, manufacturing growth slowed down to 6.8% (vs. 10.4% in March
2011) primarily due to a high base effect of 14.5% growth in April 2010. Mining showed
some improvement, recording a growth of 2.1% compared to 0.3% growth in March
2011. Growth in Electricity was flat on a yoy basis at 6.5%. As per Use-based data, Basic
goods recorded growth of 7.3% compared to 6.7% growth in April 2010 and 6.3% growth
in March 2011. Capital goods performance was healthy at 14.5% growth in spite of high
base of 35.5% growth in April 2010. Consumer durables growth dipped to 3.8% from
high base of 23.3% growth in April 2010, overall consumer goods grew by 2.9% during
April 2011.
Key changes in the new series as compared to old series are as follows:
• The base year of the new series has been set at FY2004-05 instead of the old
series’ base year of FY1993-94.
• The new series has increased the weightage of mining from 10.5% to 14.2%;
reduced weightage of manufacturing sector by 3.8% to 75.5%, while that of
electricity is largely unchanged at 10.3%.
• The new series also has a wider basket of goods with the manufactured items
covered in the index going up from 281 to 410. The total number of items under
the series has gone up to 695 from 538 earlier.
• The new series is expected to capture the industrial production process more
accurately, increasing its reliability. The new items in the IIP would also include
computer stationary, newspapers, chemicals like ammonia, ammonia sulphate,
electrical products like solder power systems, gems and jewellery and molasses.
• On the other hand, obsolete articles like typewriters, loud speakers and VCRs have
been taken off to make the series representative of the present-day industrial
production and demand scenario.
We have held the view that the policy rates are likely to peak at a lower level in this cycle
compared to the previous one as the inadequacy of forex inflows in this cycle is likely to
lead to a weaker demand momentum. This is now increasingly reflecting in the
decelerating IIP growth as well. Accordingly we expect the policy rates to peak at about
50bp higher than the current rates. We expect the RBI to continue with its monetary
tightening stance for a bit longer as inflationary pressures are yet to abate (as witnessed
from the primary articles inflation for the week ended May 28 rising to 11.5% from 10.9%
in the previous week). Also fuel & power inflation has proved to be sticky with the
international Brent crude prices hovering in the range of US$110-120.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IIP growth as per new series slows to 6.3% in April 2011
The Index of Industrial Production (IIP) growth for the month of April 2011 as per the new
series dipped to 6.3% from 8.8% registered in March 2011. As per the old series, IIP
growth was pegged at 4.4% compared to 7.3% growth in March 2011 and Bloomberg
median forecast of 5.5%.
On a sectoral basis, manufacturing growth slowed down to 6.8% (vs. 10.4% in March
2011) primarily due to a high base effect of 14.5% growth in April 2010. Mining showed
some improvement, recording a growth of 2.1% compared to 0.3% growth in March
2011. Growth in Electricity was flat on a yoy basis at 6.5%. As per Use-based data, Basic
goods recorded growth of 7.3% compared to 6.7% growth in April 2010 and 6.3% growth
in March 2011. Capital goods performance was healthy at 14.5% growth in spite of high
base of 35.5% growth in April 2010. Consumer durables growth dipped to 3.8% from
high base of 23.3% growth in April 2010, overall consumer goods grew by 2.9% during
April 2011.
Key changes in the new series as compared to old series are as follows:
• The base year of the new series has been set at FY2004-05 instead of the old
series’ base year of FY1993-94.
• The new series has increased the weightage of mining from 10.5% to 14.2%;
reduced weightage of manufacturing sector by 3.8% to 75.5%, while that of
electricity is largely unchanged at 10.3%.
• The new series also has a wider basket of goods with the manufactured items
covered in the index going up from 281 to 410. The total number of items under
the series has gone up to 695 from 538 earlier.
• The new series is expected to capture the industrial production process more
accurately, increasing its reliability. The new items in the IIP would also include
computer stationary, newspapers, chemicals like ammonia, ammonia sulphate,
electrical products like solder power systems, gems and jewellery and molasses.
• On the other hand, obsolete articles like typewriters, loud speakers and VCRs have
been taken off to make the series representative of the present-day industrial
production and demand scenario.
We have held the view that the policy rates are likely to peak at a lower level in this cycle
compared to the previous one as the inadequacy of forex inflows in this cycle is likely to
lead to a weaker demand momentum. This is now increasingly reflecting in the
decelerating IIP growth as well. Accordingly we expect the policy rates to peak at about
50bp higher than the current rates. We expect the RBI to continue with its monetary
tightening stance for a bit longer as inflationary pressures are yet to abate (as witnessed
from the primary articles inflation for the week ended May 28 rising to 11.5% from 10.9%
in the previous week). Also fuel & power inflation has proved to be sticky with the
international Brent crude prices hovering in the range of US$110-120.
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