Oct IIP @ -0.4%; Most experts see low but +ve nos ahead

The October Index of Industrial Production or IIP number is a down minus (–) 0.4% versus 4.8% (MOM) and 12.22% (YoY)
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney IThe Winning Leap SME Special
Moneycontrol

Home » News » Economy

Dec 13, 2008, 03.07 PM | Source: CNBC-TV18

Oct IIP @ -0.4%; Most experts see low but +ve nos ahead

The October Index of Industrial Production or IIP number is a down minus (–) 0.4% versus 4.8% (MOM) and 12.22% (YoY)

Like this story, share it with millions of investors on M3

Oct IIP @ -0.4%; Most experts see low but +ve nos ahead

The October Index of Industrial Production or IIP number is a down minus (–) 0.4% versus 4.8% (MOM) and 12.22% (YoY)

Post Your Comments

Share Cancel

Shubda Rao, Yes Bank

The October Index of Industrial Production, or IIP, number stands at a negative 0.4% as compared to 4.8% month-on-month and 12.22% year-on-year. A negative IIP number was last seen 10 years back and this has happened for the second time in India's history. A CNBC-TV18 poll conducted earlier had estimated the October IIP number below 2%. This was largely based on a slowdown in auto sales and lack of buying during festivities.

 

The September IIP number has been revised to 5.4% as against 4.8% earlier.

 

More pain ahead

 

Shubhada Rao of Yes Bank said the economy will see more pain for the next one–two months. “The full play-out of the credit market crunch, which started in October, is going to definitely have some kind of a lag effect on the industrial production numbers. Remember there was a credit crunch in terms of working capital requirements as well. That definitely is going to continue to play out in November and December.” She expects the IIP number in the third quarter to be washed out. “It is likely to be in contraction mode very clearly.”

 

Less cautious

 

Samiran Chakrabarty, Chief Economist at ICICI Bank, however, sees IIP in the range of 2-4% for the next few months. “We were anticipating a poor number on the back of the export drop and the commercial sales figures. “We all knew that October was one of the worst months in recent memory. So, to that extent, I am not surprised.”

 

“October was a completely stalled month where the economy was in paralysis mode. I think from November onwards we have seen some activity happening in the economy. December and January should likely be much better,” Chakrabarty said, adding, “Clearly the cyclical slowdown trends as well as slowdown trends emanating from the global financial crisis are definitely in place. So, I am not expecting a number which is in a very high range as well, maybe in the 2-4% range for the next few months is where I would be looking at.”

 

Optimistic view

 

Portfolio Manager PN Vijay said the IIP numbers came in as a shocker. However, he sees a turnaround as early as January on a month-on-month basis. “After all, services contribute 50% to GDP, agriculture 20%, and industry only 25%,” he argued.

 

Strategies to adopt

 

With inflation no longer a concern going forward, Chakrabarty sees a two-pronged strategy panning out from the Reserve Bank of India (RBI). “A lot of action has been taken not just by the RBI but also by other global central banks,” he said. “Now, there will be an increase in the pool of financial resources available to the economy by more refinancing or more CRR cuts. Then, the cost of capital has to be kept under check by continuously bringing down the repo, reverse repo rates,” he added.

 

Forecast for FY2010

 

“For the next year, I see the second half to see some stability and revival in growth numbers in terms of growth rates. So, for the full year, we may see somewhere around 3-4% band of IIP,” Rao said.

 

Rao added that for that to happen, interest rates need to be brought down not just from the policymaker, “but now, the entire focus would be how it translates into the lending rates — the effective cost of credit should go down.”

October IIP number internals snapshot:

  • Manufacturing output down by 1.2% versus 13.8% (YoY)
  • Mining output up at 2.8% versus 5.1% (YoY)
  • Capital goods output up at 3.1% versus 20.9% (YoY)
  • Consumer goods down (-)2.3% versus 13.7% (YoY)
Buy, Hold, Sell ? Hear it first on M3
Oct IIP @ -0.4%; Most experts see low but +ve nos ahead

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login