#Choicebroking August IIP Data

1. 1
Industrial recovery robust: India's industrial production grows by 6.4% in Aug 2015
In a major sign of industrial expansion, Indian industrial output, measured by the Index of Industrial
Production (IIP), accelerated to 6.4% in August versus 4.1% in July and 0.5% expansion in the same
month of previous year. Better than expected expansion in factory output was mainly driven by a
rapid expansion in the manufacturing and mining sectors. On cumulative basis, IIP grew by 4.1%
during April-Aug FY16 as against 3.1% growth in the same period of previous fiscal.
IIP: Aug’15
Satish Kumar Sharma | Desk Phone: 022 - 6707 9974 | satish.kumar@choiceindia.com© Choice Institutional Research SEBI Registered – Research Analyst
Source: MOSPI
Sectoral Performance: The growth in domestic manufacturing sector, which represent around 75.5%
of IIP, is gradually improving and in August the sector growth rose to 6.9% as against 4.6% growth in
previous month. In terms of industries, 15 out of 22 industry groups in the manufacturing sector have
shown positive growth during the month of August 2015 with industry group ‘Furniture;
manufacturing’ has shown the highest positive growth of 90.8%, followed by 40.8% in ‘Electrical
machinery & apparatus’ and 19.5% in ‘Wearing apparel. Output of mining sector also improved to
3.8% due to the higher production of crude oil, natural gas in the reported month. However, output
growth for electricity sector is still hovering around 5% due to the weak demand from industries.
Use-Based Classification: The output of capital goods sector, an indication of movement of investment
activities in economy, grew by a significant 21.8% in the reported month compared to 10% growth in
the previous month. During April-Aug FY16, capital goods sector expanded by 7.4% as against 4.8% in
the April-Aug FY15, showing an improvement in the business sentiments in the country. The output of
consumer durables grew by 17% in August, the fourth expansion in past five months. This expansion
indicates that the demand in the economy is improving, however, the part of this growth was due to
the low base effect of 15% contraction in July 2014.
Outlook: India’s factory output growth at 6.4% in August was better than market expectation of
around 5%. Growth in manufacturing sector is continuously improving and grew by 4.6% during first
five months of current fiscal compared to 2% on YoY basis. Above 20% expansion in capital goods
sector indicates an increase in investments in the economy, while gradually expansion in consumer
durables sector shows that a consumer demands has improved on the back of easing inflation and
interest rates. We are of the view that latest 50 basis points cut by RBI and easing inflation scenario to
further enhance the industrial production in the country in coming months.
YoY Sectoral Performance Use-Based Classification
IIP Mining Manufacturing Electricity Basic Capital Intermediate Durables
Non-
Durables
Index Weight 100.0% 14.2% 75.5% 10.3% 45.7% 8.8% 15.7% 8.5% 21.4%
Aug'15 6.4% 3.8% 6.9% 5.6% 3.4% 21.8% 2.6% 17.0% 0.4%
Jul'15 4.1% 0.9% 4.6% 3.5% 5.0% 10.6% 1.7% 10.3% -4.6%
Aug'14 0.5% 1.2% -1.1% 12.9% 9.0% -10.0% -0.1% -15.0% 0.4%
Cumulative Growth
Apr-Aug FY16 4.1% 1.2% 4.6% 3.2% 4.5% 7.4% 1.8% 7.7% 0.1%
Apr-Aug FY15 3.1% 2.0% 2.0% 11.7% 8.5% 4.8% 2.3% -12.8% 1.9%
Oct 12, 2015