What is your opinion on the IIP numbers announced on 12-April?

The index of industrial production for Feb-22 was announced at 1.69% on a yoy basis. This marked the 12th successive month of positive IIP growth, but the catch was that it was on a low base as Feb-21 IIP was down -3.43%. if that is factored, then the 1.69% IIP growth is not too flattering but actually disappointing. Four factors have impacted IIP in India, viz. Omicron, Fed hawkishness, cost push inflation and the ongoing Ukraine war.

One important metrics in the IIP is how the previous numbers have been revised and this time around the experience is mixed. For instance, final IIP estimate for Nov-21 was downsized by 31 bps to 1.03%. On the other hand, the first revised estimate for Jan-22 IIP growth was raised by 14 bps to 1.46%. The moral of the IIP story is that while mining and electricity are showing decisive growth, manufacturing is struggling with negative growth.

The normal way to look at IIP is on a yoy basis and now specially on a 2-year basis for pre-COVID picture. One more important way is high frequency data on MOM basis. The MOM growth is negative across mining, manufacturing and electricity. For instance, MOM growth is -1.20% for mining, -5.49% for manufacturing and -2.90% for electricity. For Feb-22, overall IIP index is down -4.69% over Jan-22. This reflects supply chain disruptions and input spikes.

The million dollar question is if the RBI would continue to focus only on growth going ahead or will it now say enough of growth focus and shift the radar towards inflation? With inflation at 6.95%, price pressure is unrelenting and therefore RBI cannot remain sanguine about inflation any longer. While growth revival is still vital, it is time for the RBI to turn its attention to arresting the price spikes. That will also help IIP growth in the process.