IIP - February 2013 - Eastern Financiers

India's Industrial output grew for the second consecutive month in a row at 0.6% in February. This follows a 2.4% expansion in January. Although the February IIP growth was above expectation as most market participants expected a de-growth in the month under review, yet signs are pretty clear that the industrial activity is again slowing down. In terms of industries, thirteen out of the twenty two industry groups in the manufacturing sector have shown positive growth during the month of February 2013 as compared to the corresponding month of the previous year.

Core Sector, which comprises of coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity and accounts for almost 40% of the factory production, shrank for the first time in decades in February, signaling the mounting weakness in the economy. Dragged down by natural gas and fertilizers sectors, the eight core industries shrank 2.5 percent in February. The core industries had grown by 7.7 percent in February, 2012. HSBC manufacturing PMI survey although painted a different picture for February, as the Index stood at 54.2 after falling to 53.2 in January. The new orders index rose to 56.3 from 55.9 in January but the export orders index fell for the second straight month. However, on a cumulative basis, IIP growth for the period April-February 2012-13 over the corresponding period of the previous year stands at 0.9%.

February Industrial production data showed that while manufacturing continued to grow in February; the pace of growth is slowing down, indicating the ongoing sluggishness in the domestic economy. High raw-material costs and steep interest rates continued to take their toll on the Sector. While Mining continued to get affected as is depicted by its continuing de-growth, Electricity was the fresh segment to slip into the red.

Capital Goods, a key indicator of investment activity in the economy, showed a robust up-tick of 9.50% in February after shrinking 1.8% in January. Capital Goods production growth stood at 10.50% in February-2012.During the April-February Period, Capital Goods contracted 7.6% as against a de-growth of 1.8% in the same period, last year.

Consumer Goods production during the month under review grew 0.5% as compared to a down-tick of 0.4% witnessed during February-2012. For the April-February period, Consumer Goods production grew 2.5% as compared to 4.7% growth, last year.

With the IIP growth slowing down, things are not looking in good shape, as far as industrial activity is concerned. Although, the IIP growth surprised on the positive side, yet it is evident that without adequate monetary & fiscal measures, industrial growth would slump further and hence makes the case stronger for the RBI to cut policy rates in its Policy review on May-3.

Source : Equity Bulls

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