MARCH IIP -3.50 % v/s 4.10 % :IS THIS WE CALL THE GROWTH ????

IIP DATA COMES AS A SHOCK !!!

MARCH 2012 Index of Industrial Production (IIP) which is declared by Ministry of Statistics & Programme Implementation came at SHOCKING -3.50 % which is complied by Central Statistic Office. The index is a composite indicator that measures the short term changes in the volumes of the industrial production.

Three sectors that constitute the index are Mining, Manufacturing and Electricity. The monthly growth rates of these three sectors for the month are for Mining (-)1.3%, Manufacturing (-)4.40% and for Electricity 2.70 %, the ministry added that as per “use – Based “ classification there has been negative growth in capital goods (-21.3%) and intermediate goods (-2.1 %) and positive growth has been achieved in basic goods (1.1%), consumer durables (0.2%) and consumer non-durables (1.0%).

The contraction was driven by particularly poor performance of the manufacturing sector, in line with weak exports that month. It is believed that April saw a turnaround, but until this is confirmed, sentiment will be weak. The data increases the odds of another rate cut, is negative for the INR, and should push INR OIS rates and bond yields down. IIP, will change the RBI (Reserve Bank of India) policy stance. RBI will not cut rates till July, but may have to start after that. Expect another 50-75 basis points rate cut in this year

BACKGROUND

• India's economy probably expanded 6.9 % in the 2011 - 12 fiscal year that ended in March, its slowest pace in three years.
• The RBI, which cut interest rates in April for the first time in three years, has forecast growth at 7.3 % in 2012 - 13.
• Expansion in manufacturing sector picked up pace in April, supported by bulging order books, but slower output growth and increasing price pressures dampened sentiment, a business survey showed.
• Growth in the services sector accelerated a touch in April thanks to a rise in new business, and optimism hit its highest level since June 2011, a survey showed last week.
• Headline inflation slowed marginally to 6.89 % in March helped by a softening in prices of manufactured goods, even as food inflation shot up. Analysts expect April inflation at 6.70 %.
• The Reserve Bank of India slashed its main lending rate - the Repo rate - by a sharper-than-expected 50 basis points in April to help revive growth. 

INDIA GDP GROWTH : A PREDICTION

Predictions about India GDP growth
Allianz, a major financial and insurance services provider has estimated that in 2009-10 fiscal gross domestic product of India would be growing at 6.5 percent. It says that even though economic recession has hit almost every financial market in world, emerging Asian economies like India would be growing, all be it at a slow pace.

Allianz says that growth of gross domestic product of India would be decidedly slow at first two quarters of financial year 2009-10 but would pick up in last two quarters. They have expressed that since there are sufficient and efficient capital and foreign exchange controls in place in India, it would be able to tide past difficulties like capital movements that can be extremely volatile.

Economic surveys conducted in India during February of 2008 fiscal had reported that gross domestic product of India would be growing at a rate of 8.7 percent. This was supposed to follow up impressive statistics of 2006-07 fiscal, when rate of growth of gross domestic product was 8.7 percent.

Much of this optimism was based on increase of rates of savings and investments in domestic financial circuit. It was predicted that aggregate gross domestic product of India in 2007-08 financial year would be approximately $10,00,82,03,62,968.85. It was expected that this growth would enable Indian economy to grow to one trillion dollar mark in near future.

In terms of nominal exchange rate, gross domestic product of India was supposed to be $1.16 trillion dollars in 2007-08 financial year. Per capita income in terms of nominal exchange rate was around $1,021.

Actual situation of India GDP growth
Actual picture is pretty different from what has been predicted. It is being assumed that in present scenario of economic recession, growth rate of India GDP would slip, if India's national government does not introduce economic stimulus packages.