Manufacturing posts a healthy 8.5 per cent growth

The Index of Industrial Production (IIP) on Monday sprang a pleasant surprise, marking a seven-month high growth of 6.8 per cent in January on the back of a strong manufacturing sector performance to signal a rebound from the tepid 2.8 per cent expansion posted in December last year.

As per the IIP data released by the Central Statistics Office (CSO) here, even as industrial growth in January 2012 was lower than the 7.5 per cent increase notched up during the same month last year, the bounce-back within a month has been owing to a healthy 8.5 per cent growth in the manufacturing sector which constitutes over 75 per cent of the index.

With the manufacturing sector accounting for over 75 per cent of the IIP and growing at a faster pace in January this year than the 8.1 per cent achieved in the year-ago period, the overall surge in industrial production has been despite the fact that the mining sector output contracted by 2.7 per cent while growth in power generation also decelerated to 3.2 per cent as compared to a robust 10.5 per cent increase a year ago. Commenting on the latest data, Finance Minister Pranab Mukherjee said: “It [IIP growth] is 6.8 per in January. There is strong recovery in the backdrop of last December's figure where IIP grew by 2.8 per cent”. However, sectoral analysis of the data, he said, “show there is not much progress in capital goods, which is a matter of concern. Consumer non-durables had contributed substantially in this growth, but not so much in consumer durables. In course of time, efforts will have to be made to build up these areas”.

For economic analysts and industry watchers, the break-up of the manufacturing sector growth appear to be more as an aberration. For, even as the capital goods segment — which indicates corporate investment — saw a negative growth of 1.5 per cent in January 2012 as against an output increase of 5.3 per cent in the same month last year, the consumer goods expanded by 20.2 per cent during the month as compared to 8.3 per cent in the year-ago period.

More importantly, manufacturing growth appears to have been boosted by the consumer non-durables segment which saw a 42.1 per cent spurt in output during the month. Output of basic goods also went up by mere 1.6 per cent as against 7.7 per cent a year ago while growth in intermediate goods contracted by 3.2 per cent as compared to an expansion of 7.4 per cent in January last year.

For April-January this fiscal, IIP growth stands pegged at 4 per cent as compared to a healthy 8.3 per cent achieved in the same period in 2010-11.

Planning Commission Deputy Chairman Montek Singh Ahluwalia noted that one should wait for the February data before concluding that the downturn is over. “[That] IIP data has moved up pretty close to 7 per cent is a good development. Our feeling is that we may end up with 7 per cent [economic growth] this fiscal … If it looks like the downturn has come to an end, then we should certainly do better than 7 per cent next fiscal,” he said.