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How is de-stocking of warehouses related to contraction of the index of industrial production?

Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?

Comments

  • At a very basic level,

    Destocking of warehouse = Inventory decrease

    Inventory = goods that a firm has produced for selling.


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  • At a very basic level,

    Destocking of warehouse = Inventory decrease

    Inventory = goods that a firm has produced for selling.


    thanks
    be a UPSC killer than a UPSC lover
  • Kirti17 said:

    Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?

    Destocking is infact directly related to production. The more inventory is cleared from wareouse, the more the space for new stock. This encourages production.

    However, GST provided a unique situation. Here, people were post poning their purchases. This was because they thought they would fetch better prices post GST.

    Now, what the seller did? They started destocking aggressively via a price drop. This helped clear the old stock. But, this as you see was a kind of forced demand creation. People themselves where not willing to buy but were given a bait.

    Industry understood this and restricted their production. Ultimately IIP got affected.
  • Life said:

    Kirti17 said:

    Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?

    Destocking is infact directly related to production. The more inventory is cleared from wareouse, the more the space for new stock. This encourages production.

    However, GST provided a unique situation. Here, people were post poning their purchases. This was because they thought they would fetch better prices post GST.

    Now, what the seller did? They started destocking aggressively via a price drop. This helped clear the old stock. But, this as you see was a kind of forced demand creation. People themselves where not willing to buy but were given a bait.

    Industry understood this and restricted their production. Ultimately IIP got affected.
    As you said destocking is directly related to production.
    If there is more destocking, there will be more production. So, if there was destocking prior to launch of GST, the production should have increased, IIP should have expanded?
  • Kirti17 said:

    Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?

    Because if the stock that's sold is taken out from warehouses then production would slow down to adjust with the flow.
  • Kirti17 said:

    Life said:

    Kirti17 said:

    Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?

    Destocking is infact directly related to production. The more inventory is cleared from wareouse, the more the space for new stock. This encourages production.

    However, GST provided a unique situation. Here, people were post poning their purchases. This was because they thought they would fetch better prices post GST.

    Now, what the seller did? They started destocking aggressively via a price drop. This helped clear the old stock. But, this as you see was a kind of forced demand creation. People themselves where not willing to buy but were given a bait.

    Industry understood this and restricted their production. Ultimately IIP got affected.
    As you said destocking is directly related to production.
    If there is more destocking, there will be more production. So, if there was destocking prior to launch of GST, the production should have increased, IIP should have expanded?
    My doubt is still not clarified
  • Kirti17 said:

    Life said:

    Kirti17 said:

    Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?

    Destocking is infact directly related to production. The more inventory is cleared from wareouse, the more the space for new stock. This encourages production.

    However, GST provided a unique situation. Here, people were post poning their purchases. This was because they thought they would fetch better prices post GST.

    Now, what the seller did? They started destocking aggressively via a price drop. This helped clear the old stock. But, this as you see was a kind of forced demand creation. People themselves where not willing to buy but were given a bait.

    Industry understood this and restricted their production. Ultimately IIP got affected.
    As you said destocking is directly related to production.
    If there is more destocking, there will be more production. So, if there was destocking prior to launch of GST, the production should have increased, IIP should have expanded?
    Kindly read the entire explanation. It was a forced demand creation to create old stock.
    Industries were bit hesitant to replace that stock. Because they too were waiting for the post GST scenario
  • In second line it is not create but clear
  • Thanks. Now it is clarified.
  • Kirti17 said:

    Latest June data shows contraction of the index of industrial production (IIP), which showed negative growth. How is this related to de-stocking of warehouses before the July 1 launch of the GST?


    pre -GST exectations ;
    by consumers expectations tht changes in prices of products ; post phones buying for post GST ,
    will the surplus stock , no futher production took place , so that the reason in the fall in IIP index
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