Industrial production growth slipped markedly to 3.6 per cent in February this year from a high of 15.1 per cent posted during the same month in 2010, mainly owing to a dismal show by manufacturing and mining, the two key sectors in the index of industrial production (IIP).
The IIP data released here on Monday reveal that even as the statistical base effect of the robust growth notched up in February last year contributed significantly to the poor show of numbers, the prime culprits to blame for the slippage in manufacturing were the capital goods and basic goods segments which performed dismally.
In particular, manufacturing or factory output slumped to 3.5 per cent in the month under review from 16.1 per cent in the year-ago period and primarily responsible for this was the capital goods segment which contracted by 18.4 per cent as compared to a robust growth of 46.7 per cent achieved in February 2010. Such was the fallout on overall manufacturing that even a comparatively better performance by the consumer goods segment with a growth of 11.1 per cent during the month could not offset the negative impact.
While the consumer non-durables segment witnessed a growth of 6.1 per cent during the month as compared to a contraction of 0.8 per cent in February 2010, the consumer durables segment also posted a growth of 23.4 per cent, though at a slower pace than the 29.1 per cent achieved last year. Intermediate goods production went up by 8.4 per cent during the month as against a growth of 15.9 per cent in February 2010.
As for the other two sectors in the IIP, mining also saw a slump in growth to 0.6 per cent during February this year from 11 per cent in the same month in 2010 while electricity generation went up by 6.7 per cent as compared to 7.3 per cent increase seen last year.
As a result, even though industrial growth for January this year has been revised upwards to 3.95 per cent from 3.7 per cent estimated earlier, the cumulative IIP growth for the April-February 2010-11 stands pegged lower at 7.8 per cent as compared to 10 per cent in the same period of the previous fiscal year.
Commenting on the IIP data, Planning Commission Deputy Chairman Montek Singh Ahluwalia maintained that the deceleration in industrial growth during February this year would not impact the country's GDP (gross domestic product) expansion — projected at 8.6 per cent for 2010-11 — as a robust farm sector performance would make up for the shortfall.
Asked if the less than 8 per cent industrial growth would be enough for achieving the projected GDP growth this fiscal, he said: “Yes, it will [be], because I think agriculture growth will be higher than the earlier forecast [of 5.4 per cent].”
Although the poor manufacturing sector performance in February is likely to prompt India Inc. to make out a case for a pause in monetary tightening policy by the Reserve Bank of India (RBI), the level of inflation is such that the apex bank is unlikely to pay heed to such concern.