Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IIP dips: Need we worry? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 13, 2001

    IIP dips: Need we worry?

    The recent figures released by the government indicate that industrial production and agricultural output remained sluggish but the services sector has performed well. This is reflected in the revenue realisation by the government through direct and indirect taxes.

    Centreís gross tax revenues for 10 months of 2000-2001 have registered a lower than expected growth at 13.5% over 10 months of 1999-2000.The central government had expected a growth rate of 17.8%. The main culprits were customs and excise. The collection of custom duties during April to January 2001 was up by a mere 1.4% over the realisations for the same period for 2000. The targeted growth rate for customs was 12.0%. This figure is quite disappointing considering the fact that crude prices shot up and the there was a devaluation of the rupee. The growth figure for excise collection was 12.0% against a target of 16.8%.

    Certainly these are not times to rejoice for the primary (agriculture) and secondary (industry) sectors. Agriculture has been hit with monsoon failure. As a result of this agricultural production is Was expected to grow by only around 0.9%. But for the half year 2002-2001 the sector has grown by 1.2%. However, the monsoon failure has indirectly affected the industrial sector.

    The industry is facing problems on other fronts like weakness in demand, high oil prices and stiff global competition.

    Earlier this year the government had scaled down the Industrial growth rate to 5.9% from estimated 8.2% for the year. During this period the index of manufacturing had been revised upward from 4.8% to 6.3%. The industrial growth for the first 9 months had fallen 5.7% compared to 6.4% for the corresponding period last year.

    The major contributor was the manufacturing sector that slowed from 7% last year to 5.9% in the current year. For December the figures for manufacturing were disconcerting at 3.3% compared to 9.3% last year.

    This is surprising considering the fact that in November the manufacturing sector had registered a strong growth of 6.5% compared to a low growth of 3.7% in the same month in the pervious year. The manufacturing sector for the first eight months had grown by 6.3% but its performance in December brought the figure down to 5.7%. The drop in growth rate could be attributed to the fact that four items radio receivers, photosensitized paper, chassis for HCVs (Heavy commercial vehicles) and engines have been dropped from the item basket for the manufacturing sector. These items were dropped, as they were prone to significant month-to-month variations. Or does this forebode an economic slowdown?

    Growth figures 9 m FY99 9 m FY00
    Industrial growth 6.4% 5.7%
    Manufacturing 7.0% 5.9%
    Electricity 7.7% 4.8%
    Mining 0.5% 4.1%
    Use Based IIP 2.2% 5.7%

    The performance of the mining and use based IIP (index of industrial production) were heartening. Mining grew by a strong 4.1% compared to 0.5% last year. Use based IIP that includes basic good, capital goods, consumer goods, consumer durables and non-durables stood at 5.7% compared to 2.2% in last fiscal. However, the December figure for this segment was at 4.9% compared to 6.4% last year. The growth came from rubber, plastics, petroleum and coal products. While the products that showed negative growth were minerals, jute, basic metal and alloy. Mining is enjoying a strong growth rate thanks to its small base.

    But itís a different story for the services sector especially software sector that continues its robust growth. Ironic, is the fact that despite governmentís reforms to boost the industrial sector it is the services sector that grew. Of course thanks to the sincere efforts we have a Dabhol at hand. But sometimes one does think is Indiaís Inc. business mix of 25.5% agriculture, 22.1% industry and 52.4% services a smart one?



    Equitymaster requests your view! Post a comment on "IIP dips: Need we worry?". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms