Wikinvest Wire

October IIP data suggests clear slowdown

The index of industrial production (IIP) for October 2008 declined 0.4%, as compared to 12.2% growth in October 2007 on back of 1.2% decline in manufacturing sector and lower growth in mining sector.Mining and electricity grew at 2.8% and 4.4%, respectively during October, 2008 whereas manufacturing sector witnessed decline of 1.2% during the same period. Intermediate goods (weight: 26.51%) and consumer goods
(weight: 28.67%) declined by 3.7% and 2.3%, respectively. A decline for three consecutive months in Intermediate goods is a cause of concern.

The cumulative growth for April-October 2008-09 stands at 4.1% over the corresponding period of the previous year. At the same time, IIP growth for September 2008 has been revised upwards to 5.4% from 4.8% earlier. The leading indicators like automobile sales, exports and excise tax collections etc have been suggesting that October & November IIP number would be weak. We believe that the broad moderation in IIP would continue for the rest of the financial year.

The fall in inflation to 8.0% for the week ended November 29, 2008 would provide greater leeway to RBI for taking softer monetary stance, going forward. In our view, fiscal and monetary stimulus by the policy makers (government and RBI) is likely to increase consumption demand and hence mitigate the ill effect of moderating investment climate, to a certain extent.
October IIP data suggests clear slowdown October IIP data suggests clear slowdown Reviewed by admin on 5:45:00 PM Rating: 5
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