IIP outperforms expectations

Election spending likely to have boosted demand

by Manasi Swamy

The Index of Industrial Production (IIP) grew by 2.7 per cent in January 2017, overshooting the popular expectations of a 0.5 per cent growth. This is the second highest growth recorded by the index in the last 15 months.

The manufacturing sector, which is characteristically demand-driven, reported a 2.3 per cent increase in production in January. The performance of its constituents also improved, with 9 of the 22 manufacturing industries reporting a growth in January, as against only four in December. Moreover, tobacco, ready-made garments and motor vehicles, the industries that thrive on consumer demand, returned to growth.

While a mild recovery from the shock of demonetisation was expected, the magnitude of growth reported by the IIP appears quite high considering that not even 60 per cent of the currency with public was restored by end-January. Usage of plastic money in India is very low and a large chunk of the population is out of the ambit of the banking system.

While perennial problems of weights and fluctuations in sample size are partially responsible for the surge in IIP, huge spending by political parties during the assembly and corporation elections has also provided a boost to the growth.

With election commission allowing each candidate in 2017 assembly election to spend Rs.2-2.8 million on campaigning, the total official spending by parties comes to around Rs.20 billion. The actual spending is suspected to have been manifoldly higher as there are reports of candidates from well known parties having admitted to have spent as much as Rs.40 million on the campaign. [see]. This excess spending is likely to have provided the additional boost to industrial growth in January 2017.

Apart from the assembly elections in five states, campaigning was going on for corporation elections in Maharashtra in January.

The industrial recovery seems to have continued in February, with alternate data sources putting out good growth estimates for the month.

The seasonally adjusted Nikkei India Manufacturing Purchasing Manager’s Index improved to 50.7 in February from 50.4 in January. This indicates that the health of the manufacturing sector improved further in February.

Data released by the Society of Indian Automobile Manufacturers (SIAM) shows that domestic passenger car sales that picked up in January 2017 (y-o-y up 10.8 per cent) after the December fall (-8.1 per cent), continued to grow in February (4.9 per cent). The magnitude of year-on-year fall in domestic two-wheelers sales also reduced from 22 per cent in December to 7.4 per cent in January and sales ended flat in February in spite of a high base.

CMIE STATISTICS
Unemployment Rate
Per cent
4.6 -0.0
Consumer Sentiments Index
Base September-December 2015
95.8 -0.2
Consumer Expectations Index
Base September-December 2015
94.8 -0.3
Current Economic Conditions Index
Base September-December 2015
97.3 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.33 3.82 2.07 1.04
Completed projects 1.01 1.94 1.16 1.00
Stalled projects 1.13 0.73 2.67 0.67
Revived projects 0.18 0.67 0.30 0.29
Implementation stalled projects 0.83 0.33 0.68 0.62
Updated on: 12 Dec 2017 9:20AM
Quarterly Financials of Listed Companies
(% change) Dec 16 Mar 17 Jun 17 Sep 17
All listed Companies
 Income 6.2 10.2 9.8 8.4
 Expenses 6.3 11.9 10.0 9.7
 Net profit 40.2 16.0 -19.6 -17.7
 PAT margin (%) 6.0 6.0 5.3 5.8
 Count of Cos. 4,509 4,444 4,318 3,364
Non-financial Companies
 Income 5.9 11.8 10.4 8.4
 Expenses 7.2 15.6 10.6 8.4
 Net profit 24.5 -2.3 -25.0 -5.0
 PAT margin (%) 6.2 6.2 5.2 6.6
 Net fixed assets 6.9 9.5
 Current assets 2.6 2.4
 Current liabilities 8.8 10.4
 Borrowings 4.8 3.3
 Reserves & surplus 6.3 8.0
 Count of Cos. 3,484 3,440 3,352 2,533
Numbers are net of P&E
Updated on: 12 Dec 2017 9:21AM
Annual Financials of All Companies
(% change) FY14 FY15 FY16 FY17
All Companies
 Income 10.0 5.2 1.1 6.7
 Expenses 9.9 5.2 1.2 6.9
 Net profit -2.3 1.4 -13.1 20.6
 PAT margin (%) 3.2 3.2 2.9 6.4
 Assets 12.3 9.4 9.7 8.6
 Net worth 9.6 8.7 10.6 7.9
 RONW (%) 6.2 6.1 5.1 9.2
 Count of Cos. 24,045 23,818 20,791 4,756
Non-financial Companies
 Income 9.7 4.3 0.1 6.7
 Expenses 9.3 4.5 -0.6 7.5
 Net profit -2.7 -5.8 11.6 14.6
 PAT margin (%) 2.2 2.1 2.6 6.3
 Net fixed assets 11.6 13.3 15.5 7.3
 Net worth 8.1 7.1 11.0 6.3
 RONW (%) 5.1 4.9 5.4 10.3
 Debt / Equity (times) 1.1 1.1 1.1 0.7
 Interest cover (times) 2.0 1.9 2.0 3.4
 Net working capital cycle (days) 69 67 66 49
 Count of Cos. 19,288 19,270 17,281 3,624
Numbers are net of P&E
Updated on: 04 Dec 2017 11:59AM

Data added for HPI at Assessment prices and HPI at Market prices