Surprise rebound in Nov IIP data: CRISIL
CRISIL Research has come out with its analytical note on surprise rebound in industrial production based on IIP data for November 2011.
January 12, 2012 / 17:46 IST
CRISIL Research has come out with its analytical note on surprise rebound in industrial production based on IIP data for November 2011.
Industrial growth rebounded to 5.9 per cent in November 2011 as compared to a contraction of 4.7 per cent (revised) in the previous month. This fiscal so far, industrial output has followed a volatile growth trajectory, with the average growth for the first eight months (April-November) standing at 3.8 per cent as compared to 8.4 per cent in the same period last year. The pick-up in growth during November 2011 was mainly on account of a strong performance by electricity and manufacturing sector. Despite the surprise performance of IIP in November 2011, we believe that the IIP growth during the remaining months of this fiscal, though positive, would remain below 5 per cent.Electricity sector supported by manufacturing (which constitutes 76 per cent of the overall industrial production) led to the pick-up in industrial production in November 2011. While electricity output increased by 14.6 per cent, manufacturing output rose by 6.6 per cent in November 2011. At the 2-digit classification, out of 22 manufacturing groups 17 showed positive growth in November 2011.Mining sector production meanwhile continued to contract for the fourth consecutive month in November 2011. It has remained weak in this fiscal so far, with an average growth of -2.5 per cent for the first 8 months as compared to 7.0 per cent in the same period last year. Ban on iron ore mining and falling gas production at the KG basin are some of the reasons which have weighed on the mining sector growth this year.Reflecting the underlying weakness in the investment scenario in the country, capital goods growth remained in the negative territory in November 2011. IIP growth excluding the volatile capital goods component stands at an even better 7.8 per cent for November 2011.Another major surprise came from the consumer goods growth, as it posted an impressive double-digit growth of 13.1 per cent in November 2011 as compared to a subdued 0.2 per cent growth in the previous month. This robust growth is particularly unexpected because it comes in an economic environment of high inflation and rising interest rate. However, we believe that this could be a blip as bulk of the jump in consumer goods growth could be attributed to a low base of 0.7 per cent in November 2010.Basic and intermediate goods production continued to remain muted in November 2011. It doesn
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