Weak data indicate delay in consumption recovery

However if core sector has seen growth slowdown, there may be a contraction in IIP for November 2016 as well. Incidentally, IIP was at 184 in December 2015 and down to 178 in October 2016 implying there was some contraction through the pre-demonetisation 10-month period.

Crop sowing data shows decline. On November 11, Ministry of Agriculture data said Rabi sowing (sowing of many crops starts early October) was up 15.7 per cent y-o-y. December 30 data says rabi sowing is up by only 6.9 per cent y-o-y, indicating decline post-demonetisation. Rice sowing began midNovember, and rice sowing is down y-o-y to 1.07 million hectares in 2016, from 1.48 million hectares in 2015.

Automobile sales data indicates a slump of scary dimensions. In December, Hero Motors saw 34 per cent contraction in terms of dealer despatches. Bajaj Auto saw 22 per cent total decline in despatches (this includes commercial vehicles and 27 per cent decline in exports). TVS was down nine per cent. Maruti Suzuki saw four per cent dip in despatches and Hyundai reported a similar four per cent decline. Some samples of vehicle registration data cited by brokerages indicates that new registrations in several states was down by a third in December.

Some contraction was expected and discounted. Hero is down by seven per cent in the past month, while Bajaj Auto is down by 4.5 per cent. But, Maruti is still trending higher by about six per cent and Mahindra &Mahindra is also still ahead by about three per cent. The Nifty is trading at the same levels as early December. Has this crash been discounted? The problem is, nobody knows if deferment of consumption will continue indefinitely. Investors are just hoping Q3 can be written off with a quick recovery in demand.

However, the crop data, which doesn't directly impact the stock market, will be ignored by most analysts. But, lower food production will make a big difference to rural well-being, months down the line. It may well result in sudden food-inflation in urban India as well. That could cramp consumption for the long-term.