There are signs of green shoots in the economy, says Chidambaram
Boosted by the growth in the power and manufacturing sectors, the Index of Industrial Production (IIP) posted a robust 8.2 per cent growth in October.
“I am very encouraged by the indications of the green shoots in economy in terms of production. IIP figures are very encouraging,’’ Finance Minister P. Chidambaram told reporters commenting on surge in IIP figures to 8.2 per cent compared to a contraction of 0.7 per cent in September.
The growth in the industrial production in October has been mainly on account of good performance of the manufacturing and power sectors, and higher output of capital as well as consumer goods. The manufacturing sector, which constitutes over 75 per cent of the index, grew by a robust 9.6 per cent in October, as against a contraction of 6 per cent in the same month last year.
However, the output of this key sector remained low at 1 per cent in the April-October period of this fiscal as against 3.8 per cent growth in the same period in 2011-12. The factory output had contracted by 5 per cent in October last year. The IIP had expanded by 9.5 per cent in June 2011. Industrial output growth in the April-October period this fiscal, however, was 1.2 per cent, less than 3.6 per cent in the same period in 2011-12.
On the impact of October growth rate on gross domestic product (GDP) for the fiscal, Mr. Chidambaram said: “One swallow doesn’t make a summer. There are signs of green shoots. Let us be happy about the moment. But let us see how we go forward in the next four months.”
He said this fiscal IIP had shown positive growth only in May at 2.5 per cent and August at 2.3 per cent. “Let us see what the next four months bring us. Investments are taking place, capacity is being created and consumption is happening in consumer durables and non- durables,” he said.
The capital goods output also showed remarkable improvement, up 7.5 per cent in October, as against a massive contraction of 26.5 per cent in October 2011. However, output of capital goods has contracted in the April-October period by 11.4 per cent, as against a dip in production by 0.5 per cent in the year-ago period. Electricity generation is up 4.7 per cent, as against 8.9 per cent in the year-ago period. Power generation expanded by 5.5 per cent in October as compared to 5.6 per cent in the same month last year.
Another segment which performed well is consumer goods as its output registered double-digit growth of 13.2 per cent in October, as against a meagre 0.1 per cent growth year ago.
During April-October this fiscal, growth in the consumer goods segment remained flat at 4 per cent. However, mining contracted by 0.1 per cent in October, compared to a decline in production by 5.9 per cent in the same month last year. The sector’s production in April-October has declined by 0.7 per cent, as against a contraction of 2.2 per cent in the year-ago period.
Overall, 17 of the 22 industry groups in the manufacturing sector have shown positive growth in October, compared to the same month last year. Consumer durables is another segment which showed smart recovery by registering a growth of 16.5 per cent in October, compared to a contraction of 0.4 per cent a year ago. The output of these goods registered a growth of 5.6 per cent during April-October, as against 4.5 per cent in the same period last fiscal. The consumer non-durables output growth also remained in double digits at 10.1 per cent in October, as against a meagre 0.5 per cent growth in the same month last year. This segment grew by 2.7 per cent in the seven month period of this fiscal, as against 3.6 per cent during April-October, 2011-12.
The basic goods growth also improved to 4.1 per cent in October, compared to 1.2 per cent a year ago. During the April-October period, this segment recorded growth of 3 per cent, compared to 6.3 per cent in the first seven months of last fiscal.
The contraction in industrial production during September this year was revised downward to 0.7 per cent, from the provisional estimate of 0.4 per cent released last month.