Decline in factory output growth continues
Official data on industrial output growth released on Friday confirmed that the Indian economy is in a “manufacturing sector recession” for the first time in recent years. The development comes barely a week after Prime Minister Manmohan Singh said at a press conference that “India’s economic growth momentum will revive”.
Manufacturing output during the first eight months of the current fiscal (2013-14) contracted 0.6 per cent, according to the data released. The rate of contraction of manufacturing deepened from 0.8 per cent in October to 3.5 per cent in November. The decline was significant in motor vehicles (7.6 per cent), machinery and equipment (8.3 per cent), fabricated metal products (7.5 per cent) and medical instruments (7 per cent).
“With factory production growth in the first-eight months of the fiscal negative and no signs of a pick-up in rural or festive demand, India can now officially said to be in a manufacturing recession,” said Madan Sabnavis, Chief Economist at Care Ratings. “For the year to end with even one per cent positive growth, the growth in the last four months will have to increase by an average of 3.2 per cent.” An economy is said to be in recession if it shows negative growth for two consecutive quarters or six months.
Mining sector output contracted 2.2 per cent in April-November 2013, according to data released by the Central Statistics Office (CSO). The overall index of industrial production (IIP) shrunk 0.2 per cent during April-November 2013. The rate of contraction for overall industrial output in November was 2.1 per cent.
Further, even exports lost momentum in December, as per trade data also released on Friday. Year-on-year export growth slowed from 5.9 per cent in November to 3.5 per cent, according to official data released here by the Commerce Ministry.
Ten of the 22 manufacturing groups showed negative growth in November. Consumer durables recorded a negative growth of 21.5 per cent over November 2012.
Radio, TV and communication apparatus showed the sharpest negative growth of 42.2 per cent, followed by office, accounting and computing machinery (27.5 per cent) and furniture manufacturing (19.5 per cent).
“The IIP is flat due to the complete stoppage in sugar production, though sugar has a low weight in it,” said Saumitra Chadhuri, member of Prime Minister’s Economic Advisory Council.
Power generation segment posted a growth of 6.3 per cent in the month under review compared to 2.4 per cent growth in the same month of 2012.
Expansion in power generation was 5.4 per cent in April-November as compared to 4.4 per cent in the same period in 2012.
Capital goods production, a barometer of demand, showed a growth of 0.3 per cent in November 2013 compared to a contraction of 8.5 per cent in the same month a year ago.