IIP - Index of Industrial Production
Wondering what is IIP?
Being a Investor in stock market it is mandatory for a person to know about the growth of Indian Economy.
We should know whether it is growing or not. If it is growing then we need to know at what rate it is growing and what are the factors that contirbute for these growth.
What are the main various sectors that are available?
Manufacturing
Mining
Electricity
are the 3 mains sectors that are to be focused
We need to know which sector is performing well as of now on short term basis
Hence arises the concept of IIP to know which sector is particularly contributing more positively for our Indian Economy.
This IIP is reduced by CSO (Central Statistics Organization) which comes under MOSPI (Ministry of Statistics and Program Implementation)
IIP is calculated on monthly basis
To be very accurate IIP data is published 6 weeks after reference month ends.
(6 weeks *7 days = 42 days)
Say for example today on November 11, we got IIP data of September month and today is 42nd day from October 1 as October has 31 days and November 11 days ended.
(So 31+11=42 days)
Government actions such as Government policy or budgetary allocation is made based on this IIP data that has been revealed every month.
IIP is an indicator of combined Industrial sector
IIP is always compared with Base Year.
Base Year for IIP is always given a value of 100
Index of Industrial Production (IIP) for the month of September 2019 stood at 123.3
Types of Goods
There are 6 types of goods namely,
1. Primary Goods
2. Capital Goods
3. Intermediate Goods
4. Infrastructure/Construction Goods
5. Consumer Durable Goods
6. Consumer non Durable Goods
* Primary Goods
Primary products fell 5.1% in September against a growth of 1.1% in August
Primary Goods consisting of fuels, fertilizer, Mining and electricity etc
* Capital Goods
Capital goods consisting of machinery items.
Capital goods production fell 20.7% in September
* Intermediate Goods:
Intermediate Goods include yarns, semi furnished steel items and chemicals etc
* Infrastructure Goods:
Infrastructure goods include paints, tiles, cements etc
* Consumer Durable Goods:
Consumer durables fell 9.9% in September against a growth of 4.1% in August
Consumer Durable Goods include Garments, telephone, passenger vehicle etc
* Consumer Non Durable Goods:
Consumer non-durables fell 9.9% in September vs growth of 4.1% in August
Consumer non Durable includes food items, medicines etc
*IIP
IIP growth for September contracts by 4.3% in September
IIP explains the strength of an economy whether economy goes in a good direction or a reverse direction
* Manufacturing sector:
Manufacturing index which is first consideration for IIP and is 77.63221% weightage of the index contracted 3.9% on September vs 1.2% on August
NIC- National Industrial Classification has made 809 items to be tracked under this sector grouped under 405 group of items
* Mineral Mining:
Second important factor for IIP is Mineral Mining with 14.372472% of weightage, fell 8.5% this month vs growth of 0.1% on previous month. 25 minerals are being tracked here under this area.
* Electricity Sector:
Third important factor is electricity sector with weightage of about
7.994318%. It gives a clear idea about total generation of electricity in a country
Electricity generation too contracted 2.6% in September 2019
Impact on Stock Market:
There are 23 sub sectors within a manufacturing and among them 17 have shown negative growth for the month of September
Once these fundamentals are weak there is no doubt that stock markets will be very volatile in nature
If you take demand-supply chain, problem prevails only on demand side. Demand of any product will not pick up unless income of any individual increases.
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