Nov-IIP at -0.64% on poor core index number: CNBC-TV18 Poll

The industrial output data for November is to be announced today. A CNBC-TV18 poll pegs it at minus-0.64 percent which is much lower than the 8.2-percent growth posted in October.

CNBC-TV18's banking editor Latha Venkatesh explains that the estimate of the November output at a minus-0.64 percent is paints an ugly picture compared to the 8.2-percent growth in October which was the highest since June largely because of a combination of base effect and festival season.
In 2011, the important festival of Diwali occurred in October and in 2012, it occurred in November. So October had a low base in 2011 while the IIP (Index of Industrial Production) data for October 2012 was good because people were still producing a lot for the festival season in the following month of November.
Now for the same reason November is going to be bad because the number of working days were fewer and people had considerably stocked up before Diwali and therefore the output was not much in November because stockists reported that they had adequate supplies. So November was always expected to be a bad month and the industrial output it is likely to come in at sub-1 percent.
With November 2011 posting good industrial output, the benefit of a base advantage has not accrued to November 2012. A precursor to the IIP data, in the form of the core index or infrastructure data, came in at a very poor 1.8-percent compared to 6.5 percent in the previous month and almost 7.5 percent a year ago.
This indicates that infrastructure growth, which comprises about 38 percent of the IIP, is at a very sluggish 1.8 percent. There is not much to expect from consumer goods which already faces a bit of a glut in a post-Diwali month.
For all these reasons, the IIP data for November 2012 is going to be negative. Investors need to also watch out for capital goods which posted a growth in October at 7.5 percent but it was entirely because of the base effect. So, it will be not surprising if there is negative capital goods growth indicating a contraction in November in the IIP data that is released today. And it is unlikely that this negative data will urge the Reserve Bank of India to cut rates on January 29.