Industrial production and consumer inflation still paint a bleak picture, says Nomura

India’s industrial cycle is expected to go through a prolonged bottoming out and maintain below-consensus GDP growth forecast of 5.6% y-o-y in FY14 (year ending March 2014), slightly up from an estimated 4.9% in FY13, says Nomura in a research note

Industrial production growth, as measured by the Index of Industrial Production (IIP) eased to 0.6% y-o-y in February from 2.4% in January, above expectations. The positive surprise was largely a sharp uptick in capital goods production and a smaller-than-expected contraction in consumer durable goods output. Notwithstanding the monthly surprises, industrial production growth is expected to remain low in the near-term on weak demand and persistent supply-side constraints, according to Nomura in its Asian Insights report.


Meanwhile, Consumer Price Index (CPI) based inflation eased to 10.4% y-o-y in March from 10.9% in February (analysts’ consensus and Nomura expectations were 10.7%). Core CPI inflation rose to 8.7% y-o-y (from 8.6% in February), while CPI food inflation eased to 12.4% (13.5%). “We see the current growth-inflation-current account dynamics in a temporary sweet spot and we do not expect this to be sustained as an increase in government spending ahead of the general elections (due in the first half of 2014) is likely to worsen the imbalances again. We maintain our below-consensus GDP growth forecast of 5.6% y-o-y in FY14,” said Nomura in its research note.


Industrial production—not a broad-based recovery

IIP grew by 0.6% y-o-y in February from 2.4% in January, above expectations (consensus -1.3%; Nomura: -2%). Nomura had expected a contraction in February because of lesser working days in February and weak demand. The demand-side break up suggests that the positive surprise is not broad based and is largely because of a sharp uptick in capital goods production and a smaller-than-expected contraction in consumer durable goods.

Capital goods are known to be volatile and the uptick in February was likely due to a sharp increase in the electrical machinery and fabricated metal products categories. By contrast, the basic goods and intermediate goods categories posted negative growth. On the supply side, manufacturing sector output growth eased only marginally to 2.2% y-o-y in February from 2.5% in January, while mining output contracted for the fifth month in a row because of the clampdown on mining activity. Electricity output growth contracted in February largely because of the leap year effect, but nonetheless remained weak and is a binding constraint in our view. Plugging in the current IP reading, Nomura estimates Q1 2013 GDP growth at 4.6% y-o-y (4.5% in Q4 2012).


CPI inflation—underlying inflationary pressures persist

CPI inflation eased to 10.4% y-o-y in March from 10.9% in February and was lower than expectations (Consensus and Nomura: 10.7%). On the positive side, food price inflation eased to 12.4% y-o-y in March from 13.5% in February led by a sharp fall in vegetable and edible oil prices. The seasonal increase in vegetable prices that Nomura was expecting did not happen in March, likely because of the delay in the onset of the summer season. However, food price inflation is likely to rebound in the next few months once the seasonal increase happens. By contrast, core CPI inflation (CPI-ex food and fuel) rose for the fourth straight month to 8.7% y-o-y in March from 8.6% in February led by an uptick in the miscellaneous categories (transport services and others).


Implications for WPI: A sustained increase in core CPI inflation indicates that inflationary pressures still persist in the economy and supports the view that the current fall in WPI inflation, though partly due to weaker demand, is largely driven by lagged effects of lower global commodity prices and delays in the revision of coal and electricity prices rather than a meaningful correction in the supply-demand dynamics in the system.


Notwithstanding the monthly surprises Nomura expect industrial production growth to remain weak in the near-term in the absence of any triggers on the demand side and continued supply-side constraints (mining and power). Reports of weaker order inflows for capital goods manufacturers suggest that even the rebound in the capital goods category is driven by a few items and may not be sustained going forward. Further, weak growth in intermediate goods (a lead indicator for final demand) and other lead indicators such as the Manufacturing PMI and auto sector data suggest that final demand continues to remain tepid. While the brokerage expects WPI inflation to moderate to 6.6% y-o-y in March, it expects inflationary pressures to re-emerge in the second half of 2013 because of rising food prices, the release of suppressed inflation, rupee depreciation and continued supply constraints. Nomura adds that the recent improvement in the merchandise trade deficit is also largely seasonal and the current account deficit is likely to widen again in Q2 2013.


The Nomura report states that the current growth-inflation-current account dynamics is a temporary sweet spot and the brokerage does not expect this to be sustained as an increase in government spending ahead of the general elections is likely to worsen the imbalances again. Overall, it expects the industrial cycle to go through a prolonged bottoming out and maintain below-consensus GDP growth forecast of 5.6% y-o-y in FY14 (year ending March 2014), slightly up from an estimated 4.9% in FY13.


RTI Judgement Series: Register police complaint if file is lost or stolen

When the PIO claimed that the file relating to the pension case of the applicant was not available, the CIC asked him to register a police complaint for the theft or loss of the file. This is the 73rd in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) in the Pension Cell of Municipal Corporation of Delhi (MCD) to file a police complaint about a file that he claimed was lost or stolen. The CIC also issued a show-cause notice to other two PIOs who failed to provide the information within 30 days.


While giving this important judgement on 24 September 2009, Shailesh Gandhi, the then Central Information Commissioner said, “The APIO Prem Raj is directed to send a copy of the police complaint and the certificate from the Chief Accountant and Financial Advisor to the appellant and the Commission before 5 October 2009. The PIO at Shahdara South zone is directed to send the information to the appellant before 5 October 2009.”


Dehradun (Uttarakhand) resident ML Guglani, on 30 February 2009, sought information under the Right to Information (RTI) Act from the PIO of the Pension Cell (HQ) in the MCD. He sought information regarding a hospital building in Rohini zone. Here is the information he sought...


1. Names of the concerned officers in the Health Office and pension office who were under obligation of taking and instigating action according to the Pension rule in a time bound manner starting two years before retirement.

2. Date wise summary of action for payment of retirement dues two years before retirement

3. Photocopies of notes recorded in files of Health & Accounts & Pension department & also the name/s of the officers of the Department and also pension & accounts section who were responsible for not assessing and paying interest suo moto at GPF ... for late payment of retirement benefits ad per provisions of Rule 68 of Pension rules.

4. Date of appointment of the appellant.

5. Designation of appellant from time to time with grade and basic pay of the appellant 31/12/1972, 01/01/1973, 31/12/1985, 01/01/1986, 31/12/1995 & 01/01/1996.

6. Amount of retirement gratuity paid with dates.

7. Amount of basic pension fixed with dates after 01/04/1996 onwards and arrears of pension, pension commutation & gratuity paid with dates.

8. Amount of first Pension paid with dates.

9. Amount and rate of commutation fixed on different dates.

10. Amount of arrears of pension paid with date.

11. Amount paid towards arrears of pay after 5th CPC.

12. Proof of payment of bonus for 1995-96 paid/payable during 1996-97.

13. Certified copy of service book permissible to retired employee on the fee prescribed of Rs5 under supplementary rule 198.

14. Amount and date of payment of GPF paid (interest & and principle) and the date up to which the interest was applied on the GPF accumulations.


The PIO, in his reply stated that “It is informed that file of PPO no. 17422G is not traceable.  As and when the file is traced out, the information pertaining to Pension Cell (HQ) shall be given.”


Guglani then filed his first appeal before the First Appellate Authority. He said, “The application has been rejected without passing speaking order and PIO has little discretion or powers to deny information except under Section 8(1) of the RTI Act.”


However, the FAA did not pass any order. Guglani then approached the CIC with his second appeal.


During the hearing, the PIO stated that the application under the RTI Act was filed with the PIO of Health Department at Shahdara South Zone where the appellant (Guglani) had worked. He stated that the information on points 1-4 and 10-12 would be available with the PIO of Health department and accounts department of Shahdra Zone.


However, despite this they (the PIOs) did not provide the information and sent the application to the PIO, DCFM, the Commission noted.


During the hearing the APIO also claimed that a file relating to the pension case of Mr Guglani was not available. On this, Mr Gandhi, the then CIC, pointed out to the APIO that the file might have been stolen.


He then directed the APIO to file a police complaint about the theft or loss of the file and obtain a certificate from the chief accountant and financial advisor that the file was stolen or lost.


While allowing the appeal, the CIC directed the APIO to send a photocopy of the GPF ledger as well as the PPO register to the appellant (Guglani) before 5 October 2009.


The Commission also directed PIO of Shahdara South Zone to provide the information on points 1-4 and 10-12 to the appellant and to send a copy of the personal file of the appellant before 5 October 2009.


Mr Gandhi also noted that the PIO of the Health Department, Shahdara South zone and the DCA, Shahdara, South zone were guilty of not furnishing information within the time specified under sub-section (1) of Section 7 of the RTI Act, by not providing the complete information within 30 days. The CIC then issues a show-cause notice to the PIOs and asked them to submit their reasons on why penalty should not be levied on them.




Decision No. CIC/SG/A/2009/001773/4818

Appeal No. CIC/SG/A/2009/001773


Appellant                                            : ML Guglani

                                                            Dehradun, Uttrakhand.


Respondent                                        : The Dy. Chief Accountant/F/FMB & PIO

                                                            Municipal Corporation of Delhi

                                                            Office of the CA-cum-FA

                                                            Pension Cell (HQ), Town Hall

                                                            Katcha Bagh, Delhi-110006.


Equity MFs witness exodus of nearly Rs15,000 crore and 45 lakh folios in FY12-13

There were just two months in FY12-13 where equity mutual fund scheme inflows were positive. Heavy outflows over the previous months led to the highest outflows for a particular financial year

After nine months of consecutive net outflows, equity mutual fund witness a positive net inflow of Rs768 crore in March on the back of lower redemptions and higher sales of tax-saving schemes. Despite the positive inflows into equity schemes coming in the last month of the financial year, the year FY12-13 saw the highest outflows, which was as high as Rs14,766 crore. The last time equity schemes witnessed such a massive outflow was in FY10-11 where the net outflow reached Rs13,139 crore. In FY11-12, equity schemes witnessed an inflow of Rs122 crore. Despite a slew of reforms brought in by the regulator to increase retail participation in mutual fund schemes, the new reforms seem to have had little effect on the net inflows. Sales have been decreasing year-on-year for the past two years. Total sales in FY12-13 amounted to Rs43,364 crore, down nearly 35% from FY10-11 when total sales touched Rs66,592 crore.


Moneylife has constantly been highlighting the huge decline in folios over the past few months as well. The month of March once again saw an exodus of over two lakh folios. The total number of equity folios declined by over eight lakh in the last quarter of the FY12-13. At the end of FY11-12 the total number of equity folios stood at 3.76 crore, and since then the number of folios have declined by over 45 lakh to 3.32 crore as on 31 March 2013.


Equity mutual fund schemes, after a net outflow of over Rs1,500 crore over the past nine months, finally saw a month of positive net inflows.  Sales of equity schemes touched Rs4,226 crore in March 2013, significantly higher compared to February 2013, where sales touched Rs3,713 crore. Equity linked savings schemes (ELSSs) which contributed 14% to the total equity mutual fund scheme sales, peaked to Rs596 crore, the highest sales for a month for the past in two years. Sales of tax-saving schemes usually peak in the last quarter of the financial year, the quarter sales improved compared to the same quarter last year. A new tax-saving avenue was opened up for first time investors in the form of Rajiv Gandhi Equity Savings Schemes (RGESSs). The six schemes that were launched during this period brought in Rs242 crore.


The introduction of direct plans seemed to have had some positive impact in equity fund flows. In January 2013, the direct route bought in Rs114 crore to equity schemes, contributing as much as 9% to the total equity inflows, according to a recent report from Karvy Computershare (Read: Mutual fund direct plans bring in significant inflows during the first month of launch). This was significantly higher compared to the month of December 2012 when there was no incentive to invest through the direct route. Just 3% of the contributions came from the direct route in December 2012, which was a total of Rs32.88 crore.




4 years ago

It was to happen FII brought funds when dollar was at a high and rupee at the lowest, and cashed when market was high and dollar had subsided quite a bit, thereby earning both ways in which I feel politicians played a pretty good role.


4 years ago

Frankly if you see it what has equity market given, but, it has actually taken back much more what was given, through others


Suiketu Shah

In Reply to CA PRADEEP AGARWAL 4 years ago

Absolutely sir.Fraudulent agents are the root cause of investors running away from the mutual fund market.Look at the headlines of today.It speaks for itself.

MF agents shd spend time and effort in rectifying their fraudulent colleagues in their industry rather than calling investors ungrateful.


4 years ago

This is a result of the regular dose of SEBI regulations on Mutual Funds, and advisors. With no one to advise them on Mutual funds, and the asset class itself becoming increasingly more regulated and inaccessible to the general public - it was only a matter of time before investors ran away.
I believe that increased awareness campaigns by AMFI, along with encouragement of good advisors can only reverse this trend.



In Reply to jobjneroth 4 years ago

The least people can do is to acknowledge (forget encouraging) the good advice of some of the advisers.

But, it is only human to be ungrateful.

Suiketu Shah

4 years ago

The only way to save the mutual fund industry from dying is by encouraging investors in every which way to invest direct and making this more and more easier.As long as MF agents wl be involved ,the industry is facing a one way road which wl meet a dead end.

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