IIP NUMBERS: INDIA INC IN TROUBLE

Well here is a breaking news…..as given by all news channel………I don’t know how much you follow this number…..but INDEX OF INDUSTRIAL PRODUCTION IS OUT and its 1.3% for august 2008 in comparison to 10.9% in same period last year.

In India, the Central Statistical Organization (CSO) is responsible for compilation and release of the Index of Industrial Production (IIP). This is a monthly index and is intended to measure changes over time in the volume of industrial production. The base year of the current series of IIP in India is 1993-94 which being revised to 1999-2000 is. The current series of IIP with base 1993-94 is based on 538individual items clubbed into 283 groups of items. The distribution of these items (item groups) and weights (100) among the three sectors covered by the index is as under

Sector NO.Of items (item group) Weight
Mining 64(1) 10.47
Manufacturing 473 ( 281 ) 79.36
Electricity 1 (1) 10.17
TOTAL 538 (283) 100.00

The index is a simple weighted arithmetic mean of production relatives calculated by using Laspeyre’s formula
I=Σ(Wi*Ri)/ΣWi,

Where I is the Index, Ri is the production relative of the i-th item for the month in question and Wi is the weight allotted to it based on Gross Output. The item-wise indices are vertically aggregated at 2-digit of industrial classification based on weighted average, weights are proportionate to Gross Value Added.

The August 2008 Index of Industrial Production (IIP) stood at 1.3% as against 10.9% in same period of last year.
· Capital Goods growth was at 2.3% versus 30.8%.
· Mining growth declined at 4% from 14.7%.
· manufacturing growth declined at 1.1% versus 10.7%
· Consumer Durables growth declined at 5.1% from 6.2%.
The market which opened weak with all stocks in red, with this news tumbled more with sensex at 10,257 falling by 1070 points and the Nifty fell 298 points to 3,215, at 12:38 pm. BSE Midcap and Small Cap indices lost 7-9%. The two exchanges will halt trading if the Sensex falls 1275 points or the Nifty loses 390 points, which is 10% circuit.
With coming of these numbers lot of uncertainty about GDP growth rate has been generated. Many economists including MOF have said this to be an “industrial recession”. And have revised their estimates for GDP growth rate 6%.
It’s a bad time for world economies. But even with this finance minister quoting 7-8% growth rate for India and with this IIP numbers sounds doubtful.
This is a major concern for our economy and if you read this I would like to know from you what your expected growth rate for Indian economy is. Where India is headed.
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