Specialist in Indian Banking and Economic Research

Hemindra Hazari

Is a Securities & Exchange Board of India (SEBI) registered research analyst with over 25 years experience in the Indian capital markets with a specialization in banking and economy research and has managerial experience of establishing profitable equities business, leading and mentoring analysts.  He has worked with prominent foreign and domestic capital market firms such as UBS, Societe Generale, HSBC, ASK Raymond James  and Karvy Stock  Broking and is a regular guest on business media channels and is respected for his non-consensus view on stocks and the market.

"Missing" – India's Chief Economic Adviser

Demonetisation: Marginalisation of India's Central Bank

Thematic (Sector/Industry)

<p>The Index of Industrial Production (IIP) for February was announced on April 12, 2017 at -1.2% yoy as against the consensus forecast of 1.3% to 2.3%. Consumer staples and capital goods reported poor numbers pulling the index down. What is surprising is that even though the April-February average IIP was 0.4% yoy as compared with 2.6% in the same period in the previous year, the November-February 2017 average IIP (during and post demonetisation) has done better than the corresponding period in the previous year which appears counter-intuitive. There are three possible explanations; firstly, IIP data is for the formal industrial sector while demonetisation impacted the cash-intensive informal sector which the IIP does not capture. Secondly, the November-February 2016 period was a low base as IIP and in particular capital goods production fell sharply. Finally, the non-consumer goods production was marginally impacted by demonetisation while consumer goods in the November-February 2017 period bore the brunt of the demonetisation in the formal industrial sector. While capital goods production continues to be weak, reflecting the poor prospects for fixed assets investment, the poor performance of consumer staples indicates the depressed conditions of the general masses in India.</p>

The Index of Industrial Production (IIP) for February was announced on April 12, 2017 at -1.2% yoy as against the consensus forecast of 1.3% to 2.3%. Consumer staples and capital goods reported poor numbers pulling the index down. What is surprising is that even though the April-February average IIP was 0.4% yoy as compared with 2.6% in the same period in the previous year, the November-February 2017 average IIP (during and post demonetisation) has done better than the corresponding period in the previous year which appears counter-intuitive. There are three possible explanations; firstly, IIP data is for the formal industrial sector while demonetisation impacted the cash-intensive informal sector which the IIP does not capture. Secondly, the November-February 2016 period was a low base as IIP and in particular capital goods production fell sharply. Finally, the non-consumer goods production was marginally impacted by demonetisation while consumer goods in the November-February 2017 period bore the brunt of the demonetisation in the formal industrial sector. While capital goods production continues to be weak, reflecting the poor prospects for fixed assets investment, the poor performance of consumer staples indicates the depressed conditions of the general masses in India.

Unusual Phenomenon of Marginally Higher Industrial Production During Demonetisation Period