2. overview Key economic indicators IIP-definition History IIP structure Relevance of IIP Price Index WPI WPI structure Relevance of WPI Recent developments
3. Key Economic Indicators GDP Agricultural production Unemployment rate Gross capital formation Index of industrial production Price index Inflation FDI/FII inflows Exchange rate Trade balance
4. Index of Industrial Production Index of Industrial Production (IIP) is an abstract number, the magnitude of which represents the status of production in the industrial sector for a given period of time as compared to a reference period of time.
5. IIP History…… The Office of the Economic Advisor, Ministry of Commerce and Industry made the first attempt of compilation and release of Index of Industrial Production with base year 1937, covering 15 important industries, accounting for more than 90% of the total production of the selected industries. The index was termed as Interim Index of Industrial Production
8. Is IIP just about overall production or does it give us an in depth picture of different industries?
9. Effect of IIP on Business Enviroment Chemical & Related Products- Good growth in this sector means that companies producing chemicals are likely to perform well. Also, check growth in user industries like Pharma, textiles, paper & leather. For instance, the chemical sector grew by 10% in April 2010 (annual growth in production) but the growth in user industry like textile, leather & paper was lower. Thus it can be deduced that the growth is coming from Pharma sector which will likely be reflected in the next few quarters’ performance.
10. Automobiles- Monthly sales data would give you a good picture of where the industry is headed. A continuous increase in production can be a good indication of an improved performance by the major auto companies in the coming quarter. Mining Sector- Mining Sector contributes approx 10% to the IIP. Growth figures can tell us in advance about how mining companies (like MOIL, Coal India), steel companies like (Tata Steel, SAIL etc.) are going to fare in coming quarters
11. Cement Sector- Growth in IIP is good news for the cement sector as it is hugely dependant on infrastructure & real estate for its demand. Usually the cement manufacturers ramp up their capacity during times of high demand. However, a slowdown can lead to an oversupply situation in the industry impacting their realizations and profits in the short run as well as the long run. So, it is important to check whether the demand has been growing consistently or not.
14. If growth in IIP is backed by higher investment activity and also lending by the banks, then banking sector is likely to experience good growth. However, lower IIP growth could impact the banking sector adversely. Thus, IIP gives you the overall picture of production activity in India . If good IIP data is backed by buoyant consumer demand then announcements like capacity expansion, building of new factories etc. by companies you are tracking indicate a good future flow of income and hence an upside to their stock prices.
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16. Price Index The price index is an indicator of the average price movement over time of a fixed basket of goods and services. Four Types: Consumer Price Index for Industrial Workers (CPI-IW) Consumer Price Index for Agricultural Labourers / Rural Labourers (CPI -AL/RL) Consumer Price Index for Urban Non-Manual Employees (CPI-UNME) Wholesale Price Index (WPI)
17. WPI The Wholesale Price Index (WPI) number is a weekly measure of wholesale price movement for the economy Every Friday
18. WPI - Structure Classified into three groups Primary Articles Fuel, Power, Light and Lubricants Manufactured Products
21. Recent Developments (cont..) Base year Survey conducted in 2009-10 Global slowdown and drought Again being conducted for 2010-11
22. Recent Developments (cont..) National Consumer Index: Consolidated CPI Will have two components- Urban and Rural Introduction – 18 February,2011 Expected to replace WPI as a benchmark of Inflation
