IIP For May and June 2021 May See A Spike Due To Base Effect

Based on the SBI index, SBI's Research Desk believes that IIP & IIP manufacturing may see a huge spike in growth in the range of 35-40% in May 2021 and 18-22% in June 2021, primarily due to base effects.

"The yearly SBI Composite Index has declined to 53.8 (Moderate Growth) in June 2021, from 60.5 (High Growth) in May 2021, and monthly index also declined to 45.8 (Moderate Decline) in Jun'21, compared to 50.5 (Low Growth) in May'21. However, it is better to ignore Yearly Index and concentrate on Monthly Index because of a distorted base same period previous year," SBI's Research Desk has said in a note.

The desk also highlights an interesting point on deposits, which it says have shown alternate periods of expansion and contraction in FY22 in first 6 fortnights.

"It is possible that such expansion followed by contraction could indicate household stress as people getting salary credits in first fortnight are withdrawing it in second fortnight for health expenses/ stocking up currency for precautionary motive and an uncertain scenario and the trend continues. However, time deposits data is indicating a different story, which is growing in double digits in spite of considerable moderation in interest rates . It is possible that such increase in time deposits may witness a moderation as household budgets are stressed," SBI Research has said.