How the poor IIP numbers affect jobs

Wed, 14 Dec Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

India's growth story seems to be hitting a series of speed breakers since quite some time, with the latest jolt coming from IIP numbers that has forced us to question even the downward revised growth targets. The Industrial production growth came at -5.1% for the month of October. This event along with already existing concerns troubles like the sliding rupee, rising inflation, subdued demand and investment has dispelled any doubts one might have regarding downturn in the broader economy in the short run. But what does this event imply for different sections of the economy?

To begin with, the news implies loss of potential opportunities for the job seekers on account of lower demand and scaled back expansion plans, not just in the manufacturing sector but allied services as well. Extending the analysis to stock markets, the investors will be facing tough times as lower production will lead to lesser sales and earnings, adding to the woes of already spiraling finance costs. Besides, the bleak prospects for the financials can also lead earning downgrades thus eroding the investment value. Bringing FIIs in this equation makes the picture even gloomier as panic selling and flight of investments will further add fuel to the fire.

However, there are certain sections on the gaining side of the event. For example, a declining demand trend could lead to discount season thus making this whole affair a precursor to pleasant experience for the people who manage to retain their jobs in the slowing economy. Also, the data might set an alarm for Reserve Bank Of India (RBI) to stop increasing rates or even to reduce them sometime later to arrest the slack in the economy, thus benefitting the borrowers.

Businesswise, the importers will feel trapped on all fronts on account high raw material cost due to depreciating rupee and slow demand backhome. However, those using local inputs might gain as raw material costs ease. But overall, lower output will translate into lesser exports feeding the vicious circle by putting downward pressure on rupee due to export import imbalance.

However, these are the possible scenarios in the short term. With some stern policy actions and reforms taking centre stage in the government's agenda, we believe that fall in industrial output could turn out to be a good opportunity to benefit from India's long term story.