IIP dips: Need we worry? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

IIP dips: Need we worry?

Feb 13, 2001

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

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

3 Rebirth of India Opportunities Are Racing Ahead in These Gloomy Times... (Views On News)

Jun 28, 2019

Tanushree Banerjee shares an update on the Rebirth of India and reveals her top 3 trends...

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms