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Index of Industrial Production (IIP)
 

  • Index of Industrial Production (IIP) measures the short term changes in production volumes of industrial products.
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  • IIP is compiled and published monthly (12th of every month) with time lag of 6 weeks from the reference month by the Central Statistics Office (CSO) of the Ministry of Statistics & Programme Implementation.
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  • IIP comprises of industries broadly divided into 3 sectors namely Mining, Manufacturing and Electricity.
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  • In addition to sector break up, IIP is also segregated in term of use based category namely basic goods, intermediate goods, capital goods, consumer durable and non durable goods.
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  • Chart below shows IIP trend over the years.
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IIP trend
 

  • From the above chart, we can see that post 2011 there is slowdown in overall industrial growth.
  • FY2014 (April- Jan 2014) has recorded zero growth.

 
Composition of IIP- Sector Wise
 

  • For computation of IIP, industries are segregated into three sectors-manufacturing, mining, electricity.
  • IIP does not include agriculture and service sector.
  • Chart below shows broad break up of components comprising IIP sector wise.

 
IIP Sector Wise
 

  • Chart below shows IIP sector wise annual growth trend over the years.

 
IIP Sector Wise Growth Trend
 

  • From the above chart, we can observe slowdown in all the 3 sectors post 2011.
  • Among manufacturing sector, capital goods industries like machinery & equipment, computing machinery etc have shown negative growth post 2011.
  • Manufacturing sector after recording high growth rate of 18.4% in 2008 has been growing in single digits between 2009 and 2011.
  • Mining sector has been witnessing contraction post 2011 which in turn affects the manufacturing sector.
  • Electricity sector has been growing on an average of 5.7%.

 
Composition of IIP- Use based category
 

  • Apart from sector wise break up of industrial production, industries are also segregated in term of use based category namely basic goods, intermediate goods, capital goods, consumer durable and non durable goods.

 
IIP Use Based Category
 

  • From chart below, we can see that industries segregated by used based also shows slowdown post 2011.
  • Consumer durable industries which include passenger cars, electronic items etc has slowed down reflecting weak consumer demand.
  • For FY2014 (April-Jan), consumer durable industries have recorded negative growth of 12.50%.
  • Similar trend is seen in capital goods industries.

 
IIP Use Based Category Growth Trend
 

 

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MIBOR – IDFC MF

By: Punam Sharma

MIBOR
 

  • Mumbai Inter Bank Offered Rate (MIBOR) is the rate at which banks borrow from other banks in the Indian interbank market.
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MIBOR snap shot

 
MIBOR snap shot
 

  • Chart below shows trend in MIBOR overnight rates from fiscal year 2007 till 13th March 2014.

 
MIBOR overnight rates
 

  • From the above chart, we can observe that generally towards half and year end the MIBOR overnight rates have spiked.
  • Generally, end of financial year, banks are mandated to maintain capital adequacy ratios for the following year which has to be set based on the funds disclosed on end of financial year. This refrain banks from lending in interbank money markets thereby spiking the overnight rates.

 

 

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Household Sector Savings-India
 
Composition of Household Sector Savings
 

  • India, household sector savings1 having the highest share of around 70% in total domestic savings comprises of savings in form of physical assets and financial savings.
  • Savings in form of physical assets include real estate, gold and account for around 68% of total household sector savings.
  • Financial savings share in total household sector is around 32% and comprises of savings in form of currency, bank deposits, shares & debentures, LIC etc.
  • Chart below shows household sector breakup (as % to total household savings) over the years.

 
Household Sector Savings Breakup
 

  • From chart above, we can observe that, savings in form of physical assets has been the preferred mode of savings for Indian household sector.
  • Financial savings has increased over years but post 2008 has been declining.

 
Household sector financial savings
 
 

  • Chart below shows breakup of household sector financial savings (as % of gross financial savings).

 
Breakup of Household Sector – Financial Savings
 

  • From chart above, we can observe that, bank deposits savings has the highest share in gross financial savings of around 54% followed by LIC savings of around 16% share.
  • Claims on government (include investments in government securities and small savings fund) show negative share which means there is more withdrawal than savings.
  • Savings in form of bank deposits share has increased from 29% in 1990 to 54% in 2013.
  • Household savings in shares & debentures has been mostly between 2% to 10%, with 2008 having the highest share of 10%.
  • Post 2008, household savings in shares & debentures has fallen to 0% in 2009 and was 3% in 2013.
  • Under shares & debentures, savings in mutual funds has highest share of around 80% followed by savings in private corporate business of around 11%.
  • The breakup household sector financial savings into deposits and shares & debentures can be seen in the charts below.

 
Breakup of Financial Savings in deposit
 
Breakup of Financial Savings in Shares & Debentures
 

 

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Composition of Domestic Savings
 

  • India, domestic savings comprises of savings from household, private corporate and public sector.
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  • Household sector dominates with around 70% contribution to total gross savings. It consists of physical and financial savings.
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  • Private corporate sector contributes to around 20% followed by public sector of around 4% to total gross savings.
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  • Chart below shows broad break up of components comprising India’s domestic savings (data is for FY13)

 

 

  • Chart below shows sector wise contribution as a percentage to total gross domestic savings over the years.

 

 

Source: RBI

 

  • From the chart above, we can see that household sector has predominately been the largest contributor to domestic savings.
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  • Over the years, contribution of private corporate sector has increased from 11% in 1990 to 23% in 2013.
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  • Public sector contribution has been the lowest and in years from 1999 to 2003 has been negative.
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  • Negative contribution means government has consumed more than its income.
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  • In 2010, public sector contributed nothing to domestic savings.
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Trend in Gross Domestic Savings
 

 

Source: RBI

 

  • Chart above shows trend in India gross domestic savings-total and sector wise as % of GDP.
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  • We can observe, from 1990 till 2000 gross domestic savings as % of GDP has been in the range of 20 to 25%.
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  • Gross domestic savings has been increasing from 2000with highest savings rate of 36.8% in 2008.
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  • However, post 2008, domestic savings rate has been declining and FY2013 was 30.1% of GDP.
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  • The key reason for decline in savings rate is high inflation and negative or low real returns.
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  • On account of increasing consumption expenditure, domestic savings have reduced.

 

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