According to ZyFin Research’s indicator there may be a moderate IIP expansion in January

ZyFin Research, a financial research and analytics company, expects moderate expansion in Index of Industrial Production (IIP) during January. ZyFin’s Business Cycle Indicator (BCI) as of December 2013 stood at 4.7%, compared to 4.2% registered in November 2013. This was led by improving foreign trade statistics with a rise in container cargo handled by Indian ports, slight decline in petrol import bill and forex reserves.

“There have been some early indications of improvement in consumer demand as measured by Zyfin’s Consumer Outlook Index for December. If this trend sustains in the near future, the looming risk of rising inventory can be averted lending itself into a steep recovery in industrial activity. We need to keep a close watch on how consumer demand evolves in 2014,” said Debopam Chaudhuri, vice president of research and development, ZyFin Research.

According to ZyFin Research the BCI indicates the state of the Indian business cycle more than two months in advance of the release of the IIP, and eliminates the lag associated with the IIP data, allowing reliable and advance detection of turns in the business cycle. A continuous uptrend for three months in BCI signifies an improving business cycle and vice versa.
 

The key highlights of ZyFin Research Business Cycle Indicator (BCI) for December 2013 are:
 

• •The BCI grew by 4.7% in December 2013 compared to 4.2% in November. If this uptick extends for two more months, we can be confident about a more sustainable growth in industrial activity
   
• The uptick in BCI was led by improving foreign trade statistics with a rise in container cargo handled by Indian ports, slight decline in petrol import bill and forex reserves
• However, growth is being restricted by the continuing downtrend in key real economic variables like production of pig iron, aluminum and electricity, declining domestic air passenger traffic and constricted money supply. This will lead to rising inventory and excess capacity
   
• Any sustained economic recovery has to be led by consumption, since 60% of Indian Gross Domestic Product (GDP) depends on private expenditure. However, a sustained recovery cannot be anticipated since the ZyFin Consumer Outlook Index (measure of consumer sentiment) has been trending down since June 2013. This suggests that consumer demand and hence retail sales would remain subdued in the near term thereby heightening the risk of a continuing slowdown in economic activity.
   

BCI (INBFBCI) is an independent, real-time indicator of the business cycle in India.  BCI is a monthly composite indicator of primary and secondary micro variables provides timely information on the state of business cycle in the Indian economy.