Perspective on IIP numbers

By Mr. Dipen Shah, Head of PCG (Private Client Group) Research, Kotak Securities:

The IIP growth for December 2012 at (-)0.6%, was lower than expectations. The November 2012 IIP figure has also been revised downwards. The contraction in December was on the back of poor performance of manufacturing and mining sectors and decline in production of capital goods as well as consumer goods. The manufacturing sector, which constitutes over 75% of the index, registered a contraction of 0.7% in December.

The IIP growth of 0.7% during April – December 2012 reflects the broad-based slowdown across sectors. The consistently weak reading on IIP may support RBI’s supportive monetary policy stance. However, the budget provisions and further reforms initiatives from the Government are expected to have a greater influence on its decision, is what Kotak Securities believes.