NewsPatrolling.com ; For the month of November 2017, the index of industrial production (IIP) was sharply higher at 8.4%. However, it needs to be noted that it could be partially attributed to the base effect as November 2016 was the month when IIP had taken a hit due to demonetization. A clearer picture emerges when we look at the IIP for the 8-month period from April to November 2017 which stands at 3.2%.
It is the components of IIP that are more interesting. While growth in mining was 1.1% and electricity was 3.9%, the real thrust to the IIP came from manufacturing which grew at 10.2%. Within manufacturing, 15 out of the 23 industry groups recorded positive growth in November 2017. In terms of weight-based contribution; digestive enzymes, HR coils, electricity, cement and sugar gave a big thrust to IIP. The IIP number came under pressure from sectors like jewellery, electric heaters, printing machinery and catalyst chemicals.
While the base effect is a major explanation for the sharp rise in IIP, there are 2 key positive takeaways for the markets. Firstly, cement has emerged as a key contributor to the IIP growth and that promises positive downstream impact. Secondly, in terms of use-based IIP, capital goods and construction goods have seen a sharp positive growth. That is a good portent for the revival of the capital investment cycle!
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