How do you see the sharp bounce in the IIP numbers for the month of April 2022?

The IIP or index of industrial production announcement came late on Friday. IIP growth for April 2022 came in at 7.14%, much higher than the normal range of under 2% as seen in the last few months. The IIP growth was visible across all the three critical verticals of the business viz. mining, manufacturing and also in the case of electricity.

Let me now focus on how the 3 segments of mining, manufacturing and electricity panned out. For the month of April 2022, the mining sector showed impressive growth of 7.81%. The most impressive growth came from the Electricity segment that grew at 11.78% on the back of robust power demand, bigger contribution from alternate sources of energy like wind and solar as well as sufficient supplies of coal from India and from imports.

However, that were two bigger stories. The first big story was that there was a 6.34% yoy growth in manufacturing. This is important as it has a weightage of 77.63% in the IIP basket. The second big story was on favourable revisions of past IIP data. The January 2022 IIP saw final upward revision from 1.46% to 1.98% while the March 2022 IIP saw the first revision from 1.85% to 2.20%. So, there is surely some reason to celebrate.

There is one point you must not miss out. How will this IIP number impact RBI monetary policy and will it impact at all? Remember that since May 2022, RBI has already shifted its focus from boosting growth to controlling inflation. Clearly, the RBI has done its best and it is time to shift focus to inflation control. That will remain the leit motif going ahead.

But the solid IIP for April 2022 will allow RBI to focus on inflation which is unjust on the vulnerable segments. The moral of the story from the latest IIP numbers is that growth has to be on auto mode or fiscal policy mode now. Markets have to stop looking at monetary policy for growth impetus. RBI is more likely to now follow the global model of hawkishness i.e. control inflation at all costs.