Capital goods and consumer non-durables perform better in March
Industrial production moved further into the positive territory with a growth of 2.5 per cent in March this year from a contraction of 2.8 per cent in the same month a year ago, on the strength of a better show by the manufacturing sector led by capital goods and consumer non-durables coupled with higher output by the power sector.
After straying into the negative zone in December 2012 with a contraction of 0.5 per cent, the official data on the Index of Industrial Production (IIP) released here on Friday revealed that following the improvement in growth numbers during the last month of 2012-13, factory output has remained positive for the third straight month. This, however, is despite the fact that the IIP growth figure for February this year stands marginally scaled down to 0.46 per cent from the provisional estimate of 0.6 per cent.
According to the latest data, the manufacturing sector, which accounts for over 75 per cent of the IIP, performed better to notch up a growth of 3.2 per cent in March this year as compared to a contraction of 3.6 per cent in the same month of the previous year. For the entire 2012-13 fiscal, however, manufacturing growth stands pegged lower at 1.2 per cent, which is less than half of the 3 per cent expansion achieved in 2011-12. As a consequence, the overall industrial growth during 2012-13 also worked out to be lower at a mere one per cent as compared to 2.9 per cent in the previous fiscal.
Be that as it may, the upward growth trend in industrial production during the last quarter of 2012-13 came as a delight to the Finance Ministry as it hoped that the momentum in factory output would help in achieving an overall economic growth rate of over 6 per cent during the current fiscal.
Commenting on the IIP data, DEA (Department of Economic Affairs) Secretary Arvind Mayaram said: “We are happy to see IIP numbers. This is exactly the trend we are hoping. If [this upward trend] continues, inflation comes down and growth [industrial] begins to pick up, I am quite confident that growth [GDP] in the current fiscal would cross the 6 per cent mark”.
In his analysis of the numbers, Prime Minister’s Economic Advisory Council (PMEAC) Chairman C. Rangarajan also sounded upbeat. “This will be the second or third month in which the manufacturing growth will be positive. We were for a time in the negative territory. All this clearly indicates that we are in the upward direction. We need a much stronger industrial growth, but certainly the direction in which it is moving is encouraging,” he said.
However, India Inc. remained unimpressed, and argued yet again for further easing of interest rates to spur consumer demand as growth in industrial production stood pegged at over a two-decade low of one per cent during 2012-13. Little wonder that Commerce and Industry Minister Anand Sharma expressed concern over the tepid industrial growth, and hinted at steps to catalyse manufacturing activity.
“The concerns remain... The government-industry task force would meet soon, and we will make an appraisal [of the manufacturing sector] and whatever intervention is required shall happen,” Mr. Sharma said.
Putting across the industry’s viewpoint, Federation of Indian Chambers of Commerce and Industry (FICCI) President Naina Lal Kidwai argued that the 3.2 per cent growth in manufacturing had come over a negative base, and could hardly be looked as a revival in manufacturing. “Overall, slowdown in economic activity and consumer demand continues to constrain manufacturing growth,” she said.
Confederation of Indian Industry (CII) Director-General Chandrajit Banerjee also pointed to the dismal show of the mining sector and consumer durables to pitch for lowering of interest rates. “What is creating concern is the growth of the mining sector which continues to be in the negative terrain. Similarly, the negative growth of consumer durables indicates subdued demand conditions, reinforcing our view that the sector continues to be stymied by the high interest rates prevailing in the economy,” he said.
In all, 10 out of the 22 industry groups in manufacturing showed positive growth during March 2013. While the capital goods sector witnessed a growth of 6.9 per cent during the month as compared to a contraction by 20.1 per cent in March 2012, there was a 6.3 per cent decline in output for the entire 2012-13 fiscal year.
Power generation in March this year went up by 3.5 per cent as compared to an increase of 2.7 per cent. However, mining output contracted by 2.9 per cent as compared to a decline of 1.1 per cent in the same month of 2012.