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Economy Update -IIP

E: research@sumedhafiscal.com www.sumedhafiscal.com

Nov 13, 2013

IIP Numbers

Industrial output for the month of September 2013 came in at 2 percent which was below market expectations. The biggest problem was yet again the Capital goods sector which clocked a negative growth rate of 6.8 percent after a equally dismal showing in the month of August ( a de growth of 2 percent). The basic premise still prevails, i.e. investment activity is yet to pick up in the Indian economy. Without revival of capital formation i.e. investment activity, we do not expect growth to pick up pace in the near future. Coming to the consumption part, consumer durable goods declined further by -10.8 percent YOY which is suggesting significant weakness in consumer demand. Numbers are pointing towards a weak investment scenario coupled with a not so strong consumption story as well. Other indicators like PMI, comemrcial vehicles sales etc are suggesting the underlying weakness in economic activity. Inflation figures also remain high with the CPI coming in at 10.09 percent compared to 9.84 percent for the previous month of September 2013. With inflation remaining high, some sacrifice in growth can be expected so as to bring the numbers down. The situation becomes even more complex looking at the external sector. The currency is yet to stabilize which is a key negative given Indias current account situation. It is becoming evidently clear that the situation in India is heading towards stagflation, with low growth and high inflation. Historically, it has been a very difficult and complex situation to deal with.
IIP General Rate (%)
20.00 15.00 10.00 5.00 0.00 -5.00 -10.00
Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13

Source: CSO, SFSL Research Page | 2

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For private circulation only

Source: CSO, SFSL Research

IIP Numbers

May-13 Jan-13 Sep-12


Sep-12 May-12 Jan-13

May-13

Mining & Quarrying (%)

Capital Goods (%)

May-12 Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10


60 50 40
May-11 Jan-11 Sep-10 May-10 Jan-10 Sep-11 Jan-12

30

20

10

-10

-20

-30

15

10

-10

-5

-40

Sep-13 May-13 Jan-13 Sep-12 May-12

Sep-13 May-13 Jan-13 Sep-12 May-12

Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10

Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10

16

14

12

10

-2

-4

20

15

10

-5

-10

-6

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Manufacturing (%)

Electricity (%)

For private circulation only

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Sep-13

Sep-13

Sep-13 May-13 Jan-13 Sep-12

Source: CSO, SFSL Research Page | 4

Sep-13 May-13 Jan-13 Sep-12

IIP Numbers

Consumer Non-Durables (%)

Intermediate Goods (%)

May-12 Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10

May-12 Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10

50

40

30

20

10

20

15

10

-10

-10

-5

May-13 Jan-13 Sep-12

May-13 Jan-13 Sep-12

May-12

May-12 Jan-12
Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10

Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10

70

60

50

40

30

20

10

-10

-20

12

10

-2

-4

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Consumer Durables (%)
Basic Goods (%)

Sep-13

Sep-13

For private circulation only

IIP Numbers

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