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IIP Bumps Up to +2% on “Electricity”



The Index of Industrial Production (IIP) for September 2013 has come in at +2.0% in what seems to be a surprise.

IIP India

However the numbers are better due to a lower base in September last year, as you can see from the chart above. A warning appears – October 2012 had the best IIP headline number which has later been revised upwards. So when we get IIP

Looking at the components, we see an improvement in all parts:

IIP Components

However the biggest weight is for Manufacturing (75%), versus electricity(10%) and Mining (15%) – so a very low growth in Manufacturing (only 0.6% higher than last year) has brought the growth in the index down to just 2%. But the electricity bump up might again not be sustainable – past spikes have not moved growth high, as you can see above.

And then, going to the use-based indexes, the deal is

IIP Use Based

There’s been an increase in basic goods, but capital goods production has gone back into negative mode. Consumer durables has remained flat, with a big decrease in Consumer Durables (-10%) offset by a spike in Consumer Non-Durables (+11%).

Btw, Rubber Insulated Cable is still Mysterious, as it was last month, but less so. It’s growing at +68% this month, versus +284% in August and +336% in July.

Overall the numbers might look okay, but the problem is the low manufacturing number of 0.6%. Seasonality might be in place here, with Diwali in November; production increases will be in October (last year the manufacturing index spiked from 174 in Sep to 182 in Oct). October might be the differentiator.

Impact: Not very exciting if you ignore the spike in Electricity (which contributed about 1.2% of the 2% increase). Electricity is likely to be evened out in October (production in Oct 2012 was very big and we are highly unlikely to beat that by 12%). 2% is not an impressive number by any standard, so it’s quite unlikely markets will find this hugely attractive.


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