Why India’s industrial production is very volatile

By

Dec. 4 2020, Updated 10:52 a.m. ET

Industrial production

The Index of Industrial Production (or IIP) is volatile to say the least. In the 16-month period from June 2013 until the latest release in September 2014, it ranged from -2.52% in May 2013 to 5.60% in May 2014.

On a longer time frame, this doesn’t smooth out as you would expect. It’s still volatile. If we look back from April 2011 until the latest release, the IIP saw a minimum of -4.98% in October 2011 and a maximum of 9.45% in June 2011.

Article continues below advertisement

Manufacturing expected to get a push

Although volatility isn’t necessarily a problem, it makes it difficult for the government to make concrete decisions for industries. However, the government is determined to give this sector—especially manufacturing—a push.

In the National Manufacturing Policy (or NMP), notified in 2011, the government set an objective for increasing “the share of manufacturing in GDP to 25%—from around 15% presently—and creating 100 million jobs over a decade.”

In the short term, a revival in the sector—signified by a sustained improvement in IIP—would depend on improvement in the overall macroeconomic environment. However, considering an economic revival, the medium and long-term outlook appears to be positive.

An exchange-traded fund (or ETF) that has significant exposure to India’s industrials is the EGShares India Infrastructure ETF (INXX).

For broader exposure to India, you can invest in the WisdomTree India Earnings Fund (EPI) and the iShares MSCI India ETF (INDA).

If you want broader exposure to emerging markets where India forms more than 10% of the portfolio, you can consider the Vanguard FTSE Emerging Markets ETF (VWO) and the Schwab Emerging Markets Equity ETF (SCHE).

Another aspect that you should understand about a country before you make an investment decision is the general price level—or inflation. In the next part of this series, we’ll discuss inflation.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.