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Economy

IIP for April 2012 at 0.12% Growth

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The Index of Industrial Production (IIP) for April 2012 has come in at 0.12% which is weak but stronger than March’s negative –3.47% (which has been revised to –3.15%)

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Manufacturing rebounded up to 0.06% while Electricity showed some strength at 4.6%. Mining, though, seems to have lost some steam.

This data isn’t very reliable, and I would only take it with a pinch of salt. However the slowing down trend is fairly clear even with other data.

The use based indexes:

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This seems to only be a pause of some sort, while the downtrend resumes.

Takeaways:

  • Growth has slowed. Markets have reacted sharply upwards in expectation of a rate cut, but I think that is only going to happen if inflation comes in at less than 8%.
  • RBI is likely to cut rates because the government is doing nothing to assuage fears on the growth end. The potential thought process is – if we don’t cut rates, the government will blame us.
  • Looking at the production slowdown in basic and intermediate goods, there is no immediate recovery in sectors like infrastructure, power or electricals. So I’d avoid players like L&T, BHEL, TataPower and so on.
  • Consumer goods still shows strength, so FMCG companies and car manufacturers are likely to do well for a while.
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