Silver lining is the upswing in consumer durables

Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Thursday that the panel “will review infrastructure sector performance for the first quarter (April-June). Depending on review...[government] will take corrective actions.”

He was speaking on the IIP (Index of Industrial Production) data released here.

The official data showed that the manufacturing sector, which accounts for over 75 per cent of the IIP, continued to be a laggard and managed to grow by a mere 2.5 per cent in May 2012 compared to 6.3 per cent for the month a year ago.

More worrisome is the fact that the output growth of the capital goods sector – which signals investment by industry in machinery and equipment – also contracted by 7.7 per cent in May this year compared to a growth of 6.2 per cent last year. Keeping pace was the mining sector which also witnessed a decline in output by 0.9 per cent as against a growth of 1.8 per cent in 2011.

In his interpretation of the official data, Economic Affairs Secretary R. Gopalan noted that while the IIP numbers have shown improvement compared to the previous year, “electricity machinery production is showing decline...[the government will be] studying if this is due to imported power equipment...believe there is some turnaround.”

The silver lining was the upswing in the consumer durables sector which showed a production growth of 9.3 per cent, much above the 5.1 per cent increase logged during the same month last year. However, growth of the consumer non-durables segment slipped and stood pegged at 0.1 per cent compared to nine per cent in 2011.

Growth in power generation was also lower at 5.9 per cent in May 2012, sharply lower than the 10.3 per cent expansion witnessed in the same month last year. Out of the 22 industry groups in the manufacturing sector, 12 sectors saw positive growth during the month.

With the May numbers now in, the data shows that during the first two months (April-May) of the current fiscal, the cumulative industrial growth rate has seen a sharp deceleration to 0.8 per cent from 6.2 per cent in the same period of 2011-12.