May 2022 IIP bounces to 19.64% on manufacturing boost
- India Infoline News Service
- 13 Jul , 2022
- 11:42 AM
After hovering around the median 2.25% mark for 5 months between November 2021 and March 2022, the IIP number jumped to 6.74% in April 2022 and further to 19.64% in May 2022. What is gratifying about the IIP growth is that the 19.64% growth in May 2022 comes on a robust growth base of 27.61% in May 2021. However, that was because of a deeply negative IIP growth in May 2020, so on a 3 year basis, the IIP may be just about coming back to pre-COVID levels.
Data Source: MOSPI
The last 13 months of IIP data can be split into 3 distinct phases. The first phase between April 2021 and August 2021, was double digit IIP growth largely on the back of a low pandemic base. Between September 2021 and March 2022, the IIP has hovered around the median rate of 2.25%. The third phase has started from April 2022 onwards, wherein the growth has again bounced back despite a solid base month. Whether, this is a 2-year base impact or genuine recovery in growth will only be evident in the next few months.
How does sectoral break-up of May 2022 IIP sound?
May 2022 is the second month of the current fiscal year FY23. A cumulative picture may at best be sketchy, but we shall still briefly look at that picture. But, let us first look at the three components of IIP viz. mining, manufacturing and electricity for May 2022. Mining sector growth for May 2022 came in at 10.90%, manufacturing at 20.63% and Electricity grew at an impressive 23.47%. While Electricity led the IIP story, the thrust came from manufacturing growth at 20.63%, especially considering its weightage of 77.63% in the IIP basket. Let us quickly look at the cumulative Apr-May numbers too. For FY23 till date, mining grew at 9.4%, manufacturing at 12.8% and electricity at 17.4%. The cumulative overall IIP growth for FY23 till date stands at an impressive 12.9%, albeit on a lower 2-year base.
When it comes to IIP, the monthly numbers go through two revisions; the first revised estimate after 1 month and the final revised estimate after 3 months. The first revised IIP estimate for April 2022 was lowered by 40 bps from 7.14% to 6.74%. Similarly, the final revised estimate for February 2022 was lowered by 31 bps from 1.46% to 1.11%. One reason for this lowering could be the impact of the various domestic and global headwinds.
Key drivers of IIP growth in May 2022
IIP growth of 19.64% for May 2022 is surely an impressive number. Here is a quick look at which specific products drove the IIP. Let us first focus on the IIP depressants. There was just one product that saw negative IIP growth in May 2022 and that was pharma & botanical products which saw de-growth of -13.1% in May 2022. Among the positive contributors were transport equipment at +129%, beverages at +128%, motor vehicles at +88.7%, apparel at +69.9%, furniture at +68.7%, electrical equipment +59.6%, wood products at +56.1%, leather products at +48.9% and machinery at +38.8%.
How does it look when you look at IIP from a use-based perspective? In terms of user groups, consumer durables grew 58.5% and capital goods at 54%. Among other user groups, the infrastructure segment grew 18.2%, intermediate goods at 17.9% and primary goods at 17.7%. However, consumer non-durables continued to show flat to tepid growth at just 0.9% for the month of May 2022 while the cumulative growth for FY23 was just 0.1%.
A quick look at the high frequency IIP numbers
We can break up the 19.64% IIP growth for May 2022 into mining, manufacturing and electricity. But, more importantly, it is the high frequency month-on-month growth that really gives you a picture of the short term momentum in the IIP basket.
Data Source: MOSPI
There is not much of debate on the yoy numbers. IIP has grown decisively over May 2021 across mining, manufacturing and electricity. One can argue that the base of May 2020 was very low so even after 2 years of positive growth, the overall impact is almost neutral. That is technically correct, but that does not take away from the strength of the recovery. But, a clearer picture emerges from the high frequency month-on-month numbers and not from the yoy numbers. Let us turn to the high frequency numbers now.
Unlike April 2022, when high frequency IIP numbers were under a lot of pressure, May has seen positive growth in the high frequency IIP too. If you look at the table above, there is positive traction across the 3 segments of IIP on a month-on-month basis and that is indicative of the fact that the short term momentum is also favouring positive IIP growth, apart from the long term trend. The MOM growth picture shows mining +3.36%, manufacturing +2.05% and electricity +2.78%. Overall MOM IIP growth at 2.30% is in stark contrast to the negative high frequency IIP de-growth manifested in April 2022. What is also appreciable is that, this performance is despite global and domestic headwinds.
How much will the IIP data impact RBI monetary stance?
Since March 2022, the RBI tune has been about controlling inflation above all else. For now, the inflation continues to stay above 7% and that is the worry. Hence, the impact of the IIP number on the RBI monetary stance would be minimal. The central bank would be more worried about the fact that inflation is nearly 300 bps above the preferred median. The positive cues coming from the IIP front is good news for the RBI as it assures the central banks that the Indian economy has the resilience to handle a more hawkish monetary policy without compromising on industrial growth.
Global monetary policy is entering an interesting phase. There is likely to be an increasingly bitter battle between curbing inflation and avoiding an all-out recession. The US yield curve is already inverted and could make the Fed more cautious. For the August policy, one can expect another rate hike from the RBI. Beyond that, it would be purely data driven.
Data Source: MOSPI
The last 13 months of IIP data can be split into 3 distinct phases. The first phase between April 2021 and August 2021, was double digit IIP growth largely on the back of a low pandemic base. Between September 2021 and March 2022, the IIP has hovered around the median rate of 2.25%. The third phase has started from April 2022 onwards, wherein the growth has again bounced back despite a solid base month. Whether, this is a 2-year base impact or genuine recovery in growth will only be evident in the next few months.
How does sectoral break-up of May 2022 IIP sound?
May 2022 is the second month of the current fiscal year FY23. A cumulative picture may at best be sketchy, but we shall still briefly look at that picture. But, let us first look at the three components of IIP viz. mining, manufacturing and electricity for May 2022. Mining sector growth for May 2022 came in at 10.90%, manufacturing at 20.63% and Electricity grew at an impressive 23.47%. While Electricity led the IIP story, the thrust came from manufacturing growth at 20.63%, especially considering its weightage of 77.63% in the IIP basket. Let us quickly look at the cumulative Apr-May numbers too. For FY23 till date, mining grew at 9.4%, manufacturing at 12.8% and electricity at 17.4%. The cumulative overall IIP growth for FY23 till date stands at an impressive 12.9%, albeit on a lower 2-year base.
When it comes to IIP, the monthly numbers go through two revisions; the first revised estimate after 1 month and the final revised estimate after 3 months. The first revised IIP estimate for April 2022 was lowered by 40 bps from 7.14% to 6.74%. Similarly, the final revised estimate for February 2022 was lowered by 31 bps from 1.46% to 1.11%. One reason for this lowering could be the impact of the various domestic and global headwinds.
Key drivers of IIP growth in May 2022
IIP growth of 19.64% for May 2022 is surely an impressive number. Here is a quick look at which specific products drove the IIP. Let us first focus on the IIP depressants. There was just one product that saw negative IIP growth in May 2022 and that was pharma & botanical products which saw de-growth of -13.1% in May 2022. Among the positive contributors were transport equipment at +129%, beverages at +128%, motor vehicles at +88.7%, apparel at +69.9%, furniture at +68.7%, electrical equipment +59.6%, wood products at +56.1%, leather products at +48.9% and machinery at +38.8%.
How does it look when you look at IIP from a use-based perspective? In terms of user groups, consumer durables grew 58.5% and capital goods at 54%. Among other user groups, the infrastructure segment grew 18.2%, intermediate goods at 17.9% and primary goods at 17.7%. However, consumer non-durables continued to show flat to tepid growth at just 0.9% for the month of May 2022 while the cumulative growth for FY23 was just 0.1%.
A quick look at the high frequency IIP numbers
We can break up the 19.64% IIP growth for May 2022 into mining, manufacturing and electricity. But, more importantly, it is the high frequency month-on-month growth that really gives you a picture of the short term momentum in the IIP basket.
| Weight | Segment |
IIP Index May-21 |
IIP Index May-22 |
IIP Growth Over May-21 |
IIP Growth (HF) Over Apr-22 |
| 0.1437 | Mining | 108.30 | 120.10 | +10.90% | +3.36% |
| 0.7764 | Manufacturing | 111.50 | 134.50 | +20.63% | +2.05% |
| 0.0799 | Electricity | 161.90 | 199.90 | +23.47% | +2.78% |
| 1.0000 | Overall IIP | 115.10 | 137.70 | +19.64% | +2.30% |
There is not much of debate on the yoy numbers. IIP has grown decisively over May 2021 across mining, manufacturing and electricity. One can argue that the base of May 2020 was very low so even after 2 years of positive growth, the overall impact is almost neutral. That is technically correct, but that does not take away from the strength of the recovery. But, a clearer picture emerges from the high frequency month-on-month numbers and not from the yoy numbers. Let us turn to the high frequency numbers now.
Unlike April 2022, when high frequency IIP numbers were under a lot of pressure, May has seen positive growth in the high frequency IIP too. If you look at the table above, there is positive traction across the 3 segments of IIP on a month-on-month basis and that is indicative of the fact that the short term momentum is also favouring positive IIP growth, apart from the long term trend. The MOM growth picture shows mining +3.36%, manufacturing +2.05% and electricity +2.78%. Overall MOM IIP growth at 2.30% is in stark contrast to the negative high frequency IIP de-growth manifested in April 2022. What is also appreciable is that, this performance is despite global and domestic headwinds.
How much will the IIP data impact RBI monetary stance?
Since March 2022, the RBI tune has been about controlling inflation above all else. For now, the inflation continues to stay above 7% and that is the worry. Hence, the impact of the IIP number on the RBI monetary stance would be minimal. The central bank would be more worried about the fact that inflation is nearly 300 bps above the preferred median. The positive cues coming from the IIP front is good news for the RBI as it assures the central banks that the Indian economy has the resilience to handle a more hawkish monetary policy without compromising on industrial growth.
Global monetary policy is entering an interesting phase. There is likely to be an increasingly bitter battle between curbing inflation and avoiding an all-out recession. The US yield curve is already inverted and could make the Fed more cautious. For the August policy, one can expect another rate hike from the RBI. Beyond that, it would be purely data driven.
IIP growth turns around to 7.11% in November 2022
- 16 Jan , 2023
- 7:42 AM
- The latest IIP figure for November 2022 (IIP is announced with 1-month lag) marked a sharp turnaround in factory output growth.
Apr-22 IIP bounces to 7.14% on all-round improvement
- India Infoline News Service
- 12 Jun , 2022
- 10:37 PM
After hovering around the 2% mark for 5 months between November 2021 and March 2022, the IIP number jumped to 7.14% in April 2022. April 2020 was the worst month in terms of COVID impact when the IIP index had fallen to as low as 54. Hence on a 3 year period compared to pre-COVID levels, the IIP growth would still be tepid. The bigger challenge would be to sustain this level of IIP growth in coming months.
Data Source: MOSPI
The last 13 months of IIP growth can be split into 3 phases. The first phase between April 2021 and August 2021, was double digit IIP growth but that was more due to a low base. While September and October were the adjustment period, the pressure was visible since November 2021, when IIP was hovering consistently around 2%. From that perspective, April 2022 is the first month when we have seen meaningful and tangible bounce in IIP.
Break up of sectoral growth in IIP – April 2022
Quite obviously, April 2022 being the first month of FY23, a cumulative picture will hardly add any value. Hence, we will stick to monthly picture of the IIP growth and focus on the three key components of IIP viz. mining, manufacturing and electricity. Mining sector growth for April 2022 came in at 7.81% while Electricity grew at an impressive 11.78%. The power sector growth was led by higher power demand, catered to with adequate supply of domestic and imported coal. The big positive story was 6.34% yoy growth in manufacturing which has a weight of 77.63%; which is why IIP tends to gravitate towards manufacturing.
When it comes to IIP, the monthly numbers go through two revisions; the first revised estimate after 1 month and the final revised estimate after 3 months. It gives an idea of how the current IIP could get modified. The final IIP estimate for January 2022 was upgraded by 52 bps from 1.46% to 1.98%. At the same time, the first revised estimate for March 2022 was also upgraded by 35 bps from 1.85% to 2.20%. The good news is that actual IIP numbers are being revised above the quick estimates, despite a series of headwinds like war, central bank hawkishness, spectre of inflation and supply chain bottlenecks.
Product wise view of the April 2022 IIP
IIP growth of 7.14% is surely an impressive number for April 2022. Here is a quick look at which specific products drove the IIP. First a quick look at the depressants. Some of the products that saw negative growth IIP in April 2022 included textiles at -0.3%, paper products -5.4%, pharmaceuticals -3.6% and rubber products -1.9%. Among the positive contributors were Apparel growing at 65.7%, furniture at 57.8%, printing 38%, beverages 29.7%, tobacco products 23.7% and coke & refined petroleum at 10.6%.
However, products only give part of the picture. Another important approach is a use-based break-up of IIP growth. Here some interesting trends have emerged. In terms of user groups, primary goods grew by 10.12% and they also have the highest weightage of 34.05%. Among other user groups, the capital goods saw growth of 14.68%, hinting at a possible revival in the capital investment cycle. But, the biggest takeaway was that the consumer segment saw positive growth for the first time in the last 6 months, hinting at consumption driven growth finally making a comeback.
What is the story behind the high frequency numbers?
We can break up the 7.14% April 2022 IIP growth into mining, manufacturing and electricity. But, more importantly, we also look at high frequency month-on-month growth.
Data Source: MOSPI
In the table above, we have looked at 2 different approaches to the IIP numbers. There is yoy data and there is the high frequency month-on-month data of IIP growth. The month-on-month high frequency data in the last column, captures short term IIP trends. Here is what we can decipher from the numbers.
There is not much of debate on the yoy numbers. IIP has grown decisively over April 2021 across mining, manufacturing and electricity. Of course, if you adjust for the base volatility in the last two years, the actual growth may not be too impressive, but we will leave that aside for now. The good news is that despite IIP index doubling in April 2021, the April 2022 IIP has still shown impressive positive growth of 7.14%. That is the key takeaway.
However, there is a lot of pressure on high frequency data. If you look at MOM IIP numbers, only the power sector has maintained the short term momentum, while mining and manufacturing are feeling the pressure of global cues. The MOM growth picture shows mining (-19.67%), manufacturing (-8.81%) but electricity (+1.83%). Overall MOM IIP growth at -9.21% is in stark contrast to the positive MOM growth manifested in March 2022. The combination of a high base and short-term headwinds played spoilsport.
With the IIP data impact the RBI monetary stance
The RBI has already undertaken 2 rounds of repo rate hikes in the last 2 months. The hike was 40 bps in May 2022 and 50 bps in June 2022. One thing is clear that the RBI is going to attack inflation above all else. For now, that appears to be the game plan. The RBI has underlined in its policy statement that growth may be fundamentally salutary, but inflation is grossly unjust. For now, the first focus of the RBI will be to reining inflation, which has touched 7.79% for April 2022. The target is the median 4%; with 2% leeway both ways.
In the last few months, two things have happened. Most of the global central banks like the Federal Reserve, Bank of England, Reserve Bank of Australia and the RBI have taken up inflation control as their primary focus. World Bank has downsized growth and that is a risk global economies are preparing for. That will surely impact IIP in the coming days. For now, the days of government accommodation to boost growth are well and truly over.
Data Source: MOSPI
The last 13 months of IIP growth can be split into 3 phases. The first phase between April 2021 and August 2021, was double digit IIP growth but that was more due to a low base. While September and October were the adjustment period, the pressure was visible since November 2021, when IIP was hovering consistently around 2%. From that perspective, April 2022 is the first month when we have seen meaningful and tangible bounce in IIP.
Break up of sectoral growth in IIP – April 2022
Quite obviously, April 2022 being the first month of FY23, a cumulative picture will hardly add any value. Hence, we will stick to monthly picture of the IIP growth and focus on the three key components of IIP viz. mining, manufacturing and electricity. Mining sector growth for April 2022 came in at 7.81% while Electricity grew at an impressive 11.78%. The power sector growth was led by higher power demand, catered to with adequate supply of domestic and imported coal. The big positive story was 6.34% yoy growth in manufacturing which has a weight of 77.63%; which is why IIP tends to gravitate towards manufacturing.
When it comes to IIP, the monthly numbers go through two revisions; the first revised estimate after 1 month and the final revised estimate after 3 months. It gives an idea of how the current IIP could get modified. The final IIP estimate for January 2022 was upgraded by 52 bps from 1.46% to 1.98%. At the same time, the first revised estimate for March 2022 was also upgraded by 35 bps from 1.85% to 2.20%. The good news is that actual IIP numbers are being revised above the quick estimates, despite a series of headwinds like war, central bank hawkishness, spectre of inflation and supply chain bottlenecks.
Product wise view of the April 2022 IIP
IIP growth of 7.14% is surely an impressive number for April 2022. Here is a quick look at which specific products drove the IIP. First a quick look at the depressants. Some of the products that saw negative growth IIP in April 2022 included textiles at -0.3%, paper products -5.4%, pharmaceuticals -3.6% and rubber products -1.9%. Among the positive contributors were Apparel growing at 65.7%, furniture at 57.8%, printing 38%, beverages 29.7%, tobacco products 23.7% and coke & refined petroleum at 10.6%.
However, products only give part of the picture. Another important approach is a use-based break-up of IIP growth. Here some interesting trends have emerged. In terms of user groups, primary goods grew by 10.12% and they also have the highest weightage of 34.05%. Among other user groups, the capital goods saw growth of 14.68%, hinting at a possible revival in the capital investment cycle. But, the biggest takeaway was that the consumer segment saw positive growth for the first time in the last 6 months, hinting at consumption driven growth finally making a comeback.
What is the story behind the high frequency numbers?
We can break up the 7.14% April 2022 IIP growth into mining, manufacturing and electricity. But, more importantly, we also look at high frequency month-on-month growth.
| Weight | Segment |
IIP Index Apr-21 |
IIP Index Apr-22 |
IIP Growth Over Apr-21 |
IIP Growth (HF) Over Mar-22 |
| 0.1437 | Mining | 107.60 | 116.00 | +7.81% | -19.67% |
| 0.7764 | Manufacturing | 124.60 | 132.50 | +6.34% | -8.81% |
| 0.0799 | Electricity | 174.00 | 194.50 | +11.78% | +1.83% |
| 1.0000 | Overall IIP | 126.10 | 135.10 | +7.14% | -9.21% |
In the table above, we have looked at 2 different approaches to the IIP numbers. There is yoy data and there is the high frequency month-on-month data of IIP growth. The month-on-month high frequency data in the last column, captures short term IIP trends. Here is what we can decipher from the numbers.
There is not much of debate on the yoy numbers. IIP has grown decisively over April 2021 across mining, manufacturing and electricity. Of course, if you adjust for the base volatility in the last two years, the actual growth may not be too impressive, but we will leave that aside for now. The good news is that despite IIP index doubling in April 2021, the April 2022 IIP has still shown impressive positive growth of 7.14%. That is the key takeaway.
However, there is a lot of pressure on high frequency data. If you look at MOM IIP numbers, only the power sector has maintained the short term momentum, while mining and manufacturing are feeling the pressure of global cues. The MOM growth picture shows mining (-19.67%), manufacturing (-8.81%) but electricity (+1.83%). Overall MOM IIP growth at -9.21% is in stark contrast to the positive MOM growth manifested in March 2022. The combination of a high base and short-term headwinds played spoilsport.
With the IIP data impact the RBI monetary stance
The RBI has already undertaken 2 rounds of repo rate hikes in the last 2 months. The hike was 40 bps in May 2022 and 50 bps in June 2022. One thing is clear that the RBI is going to attack inflation above all else. For now, that appears to be the game plan. The RBI has underlined in its policy statement that growth may be fundamentally salutary, but inflation is grossly unjust. For now, the first focus of the RBI will be to reining inflation, which has touched 7.79% for April 2022. The target is the median 4%; with 2% leeway both ways.
In the last few months, two things have happened. Most of the global central banks like the Federal Reserve, Bank of England, Reserve Bank of Australia and the RBI have taken up inflation control as their primary focus. World Bank has downsized growth and that is a risk global economies are preparing for. That will surely impact IIP in the coming days. For now, the days of government accommodation to boost growth are well and truly over.
RELATED BLOG POSTS
- 16 January, 2023 |
- 2:27 PM
The latest IIP figure for November 2022 (IIP is announced with 1-month lag) marked a sharp turnaround in factory output growth.
2023, IIFL Securities Ltd. All Rights Reserved
Follow us on
2023, IIFL Securities Ltd. All Rights Reserved
Follow us on