January’s sharp gain in IIP—more of a pointer to ill-health?

January’s IIP has beaten all expectations, growing at 6.8 per cent compared with December’s tepid 1.8 per cent, and driven by the manufacturing sector growing at 8.5 per cent. However, a closer look does not speak too well about fundamentals. In terms of industries, just thirteen out of the twenty two industry groups (as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the month of January 2012. Categories that are pointers to the health of the economy such as capital goods, intermediate goods and consumer durables have all registered negative numbers. A huge 42 per cent gain in consumer non-durables is primarily powered by chewing tobacco! It is time for policy makers to undertake a more careful diagnosis of the health of the economy.

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