May 12th, 2011

Index of Industrial Production (IIP)

Higher growth in the capital goods & manufacturing segment supported plummeting IIP, which registered a growth
of 7.3% in Mar 11 against 3.7% in Feb 11 (above the consensuses estimates of 4%). This was evident as the six core
infrastructure industries in Mar 11 registered a positive growth of 7.4% from 6.8% in Feb 11.

The Manufacturing sector which has largest weightage (~80%) in the IIP accelerated by 8% in Mar 11 from 3.63% in
Feb 11. Besides manufacturing, electricity generation (weightage of 10.1%) also increased by 7.19% against 6.7% in Feb
11, however, mining sector (weightage of 10.4%) declined by 0.2% against 1.03% in Feb 11.

In used based industry, three out of the main four segments registered a lower growth in Mar 11. The basic,
intermediate goods fell to 4.2% and 5.3% in Mar 11 from 6% and 8.6% in Feb 11. The higher inflation numbers has
dampened the consumer sentiment as consumer goods segment registered a slower growth of 7.7% in Mar 11 against
11% in Feb 11. The capital goods segment which consistently for 3 months shown negative growth increased to 12.9%
in Mar 11 against 18.15% in Feb 11. Some of the important items of Capital goods contributing to the high growth in
this category are Turbines (steam/hydro) (67.6%), Process control instruments (42.9%), Boilers (31.5%) and Complete
tractors (30.2%). Alarm time pieces (59.7%), Two wheeler tyres (55.5%) and Passenger cars (33.6%) are some of the
important items contributing towards the high growth of Consumer durable goods.

In terms of industries, 13 out of the 17 industry groups have shown positive growth during the month of Mar 11 as
compared to the corresponding month of the previous year. The industry groups Leather and Leather & Fur Products
have shown the highest growth of 28.6%, followed by 25.6% in Other Manufacturing Industries and 18.4% in Food
Products. On the other hand, the industry groups Wood and Wood Products; Furniture and Fixtures have shown a
negative growth of 66.4% followed by 7.9% in Textile Products (including Wearing Apparel).

Conclusion
The volatility in the IIP numbers is likely to continue on back of higher base and increasing cost (elevated inflation).
Decline in consumer goods growth rate is a concern, project investments slowing down and perhaps higher interest
rates have now started impacting the consumption demand. Unless we get another month of similar strong data we
can not say that the trend has reversed. While data is obviously positive, growth is estimated to be at a lower level.
With high volatility in IIP & high inflation numbers, the Reserve Bank of India would be facing a dilemma on policy
changes in the next policy review.

Wealth Research, Unicon Financial Intermediaries. Pvt. Ltd.

Email: wealthresearch@uniconindia.in Shweta Rane | srane@uniconindia.in
 May 12th, 2011

Index of Industrial Production

Particulars (% YoY) Weight Mar-11 Mar-10 Feb-11
Sectoral classification
Mining 10.47 0.21 12.30 1.03
Manufacturing 79.36 7.90 24.32 3.63
Electricity 10.17 7.19 8.33 6.75
General 100.00 7.33 22.20 3.65
Use-based classification
Basic Goods 35.57 12.91 68.28 (18.15)
Capital Goods 9.26 12.91 68.28 (18.15)
Intermediate Goods 26.51 5.37 18.49 8.61
Consumer Goods 28.66 7.70 12.86 11.04
Consumer durables 5.36 12.33 35.56 23.46
Consumer non-durables 23.30 5.67 5.17 6.00

20.0
Mining Manufacturing Electricity IIP
18.0
16.6 IIP
18.0 16.0
15.0
16.0 14.0
14.0 12.2 11.3 12.0
12.0
10.0 10.0
7.2 6.9 7.3
8.0 8.0
6.0 4.4 3.6 3.9 3.7 6.0
4.0 2.5
4.0
2.0
0.0 2.0
May-10

Jun-10

Jul-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11
Sep-10
Apr-10

Aug-10

0.0

Wealth Research, Unicon Financial Intermediaries. Pvt. Ltd.

Email: wealthresearch@uniconindia.in
 May 12th, 2011
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Email: wealthresearch@uniconindia.in