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IIP Growth – V-shape rise in June – Mining star Performer – Will it Sustain ?

August 12, 2009

The Indian Industrial production (IP) growth accelerated to 7.8%YoY in June: This compares with a growth of 2.2%YoY (revised downwards from 2.7% earlier) in May and 1.2%YoY in April 2009. While we were expecting industrial production to remain on the recovery path, the growth in June was much above market expectations and our expectations. Infact, the IP growth in June 2009 is highest since February 2008. While we expect sustained recovery in IP growth, the monthly growth numbers do tend to be volatile at times and there could be some retracement in IP growth over the next 1-2 months. The mining segment growth accelerated to double digit levels of 15.4%YoY in June (vs. 3.3% in the previous month). Growth in the electricity segment picked up to 8%YoY compared to 3.3% in May.

On the use-based classification, the growth in the basic goods segment accelerated to 10.1%YoY in June (vs. 3.8% in May). Capital goods growth also picked up sharply to 11.8%YoY in June after declining 3.4%YoY in the previous month. Growth in the consumer goods segment accelerated to 4%YoY in June after declining 0.4%YoY in May. Within consumer goods, while the durables segment growth accelerated further to 15.5%YoY (vs. 12.5% in May), the growth in the non-durables segment also moved into positive territory to 0.3%YoY (vs. -4.3% in May). Growth in the intermediate goods accelerated to 7.9%YoY in June (vs. 6.4% in May).

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