Jat stir to hit auto & ancillary part of IIP in February

The ripple effects of the Jat quota stir in Haryana are likely to be felt across most states in northern India.

According to the PHD Chamber of Commerce and Industry, the loss on account of the stir is likely to be Rs 34,000 crore, with at least half of this across Punjab, Himachal Pradesh, and Rajasthan.

The impact of the agitation on the Index of Industrial Production (IIP), though, is likely to be muted, with only the automobile and automobile ancillaries segment of the index likely to be hit in February.

One major disruption was in transportation across the Grand Trunk (GT) Road.

As the road belt is the gateway to the northern states, economic activities across these states would suffer. "Roughly 200,000 trucks operate daily through these states," says S P Sharma, chief economist at the PHD Chamber. "Roughly 550 trains were cancelled due to the agitation." This disruption has restricted movement of both raw materials and finished goods across the northern states.

Within Haryana, the auto, auto component and handloom sectors have been particularly hit, including production at auto firms such as Maruti and Hero. This could impact IIP growth in February.

Aditi Nayar, senior economist at ICRA, says: "The recent disruption in parts of Haryana resulted in some loss of man-days, which would have a temporary impact on the manufacturing growth in February 2016. Moreover, the impact may be limited to certain sub-sectors such as automobiles and auto ancillaries."

Motor vehicles, trailers and semi-trailers and other transport equipment together account for 5.8 per cent of the IIP.

A probable estimate of production loss could be calculated by looking at the segment numbers during November and December.

This was when Chennai, a major automobile manufacturing hub, was first hit by heavy rains and then floods. Though the two situations aren't comparable, a look at the segment's performance could provide some indication as to how much production could have been hit in February.

Data show the motor vehicles, trailers & semi-trailers segment contracted by 6.4 per cent in November when heavy rains brought economic activity in Tamil Nadu to a standstill. But the segment bounced back, growing an astonishing 11.5 per cent in December. Growth over the two-month period averaging a mere two per cent suggests that there is plenty of room on the downside. A contraction in the segment in February could further bring down IIP, which contracted 1.3 per cent in December.