Manufacturing sector pulls down growth

Bellying hopes of a recovery, industrial production slipped back into negative territory in February, according to official data released on Friday. Continuing lacklustre manufacturing performance, especially in capital goods, dragged industrial production to negative growth of 1.9 percent, the data released shows. In February 2013, the Index of Industrial Production (IIP) had grown modestly by 0.6 percent.

For January, the Central Statistics Office (CSO) revised the data for factory output upward to positive growth of 0.8 percent from the provisional estimate of 0.1 percent.

Factory output as measured by the IIP had started to decline in October 2013, when it had contracted 1.2 percent. The trend continued till December.

Cumulative growth in the 11-month period April 2013 - February 2014 stood at (-) 0.1 percent against positive growth of 0.9 percent in the corresponding period of the previous year, according to the data released. It is, therefore, unlikely that 2013-14 will end with positive industrial growth.

It is very unlikely that there will be positive growth in March, said Care Ratings, as the base year effect is quite sharp. “With a peak index in March 2013, the month-on-month growth in March 2014 will have to be 12.4 percent for even zero growth,” said Care Ratings Chief Economist Madan Sabnavis, “Therefore, overall manufacturing and industrial growth will be negative in March as also for the entire year”.

The weak industrial output performance continues mainly on account of poor consumer demand. High inflation and unaffordable interest rates on EMIs have dented the consumer sentiment.

Manufacturing, which constitutes over three-fourth of the index, shrunk 3.7 percent in February. It had grown 2.1 percent in the same month in the previous year. During April 2013 – February 2014, the sector's output contracted 0.7 percent.

Production of capital goods shrank 17.4 percent, in sharp contrast to an expansion of 9.1 per cent in the same month in 2012. The segment declined 2.5 percent in April-February over a contraction of 7.7 per cent in the same 11-month period in the previous year.

Overall, 13 of the 22 industry groups in manufacturing showed negative growth in February as compared to the corresponding month of 2012.

The industry group ‘Radio, TV and communication equipment and apparatus’ showed the steepest negative growth of (-) 34.1 percent, followed by (-) 24.6 percent in ‘Electrical machinery and apparatus’ and (-) 21.3 percent in ‘Wearing apparel; dressing and dyeing of fur’.

On the other hand, the industry group ‘Furniture manufacturing’ grew the most–by 9.3 percent, followed by 9.1 percent in ‘Textiles’ and 6.1 percent in ‘Coke, refined petroleum products and nuclear fuel’.

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