Industrial growth continues to be sluggish, with official data pointing to a 3.7 per cent year-on-year production increase in January.
That marks a third successive month of tepid growth, notwithstanding the latest number surpassing market expectations of less than three per cent and the Central Statistics Office also revising upwards its earlier estimate for December, from 1.6 per cent to 2.5 per cent.
The Finance Minister, Mr Pranab Mukherjee, noted that while the IIP (Index of Industrial Production) growth for January was “better” than that for December, he was still “not happy”.
The Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, went a step ahead, admitting that “the overall slowdown for the last 2-3 months is a matter of concern”.
The lacklustre 3.7 per cent year-on-year IIP increase for January was partly due to the so-called base effect: The same month last year returned a growth rate of 16.8 per cent (see Table). The high base effect is likely to manifest itself in the next couple of months as well, which, in turn, raises questions over the Centre's current 8.2 per cent industrial growth projections for the entire fiscal.
For the April-January period as a whole, industry grew cumulatively by 8.3 per cent, as against 9.5 per cent in the corresponding 10 months of 2009-10.
Among the major components of the IIP, the index for manufacturing rose 3.3 per cent in January (lower than the 17.9 per cent for the same month of 2010), mining 1.6 per cent (15.3 per cent) and electricity 10.5 per cent (5.6 per cent).
The cumulative growth during April-January stood at 8.6 per cent (compared with 9.9 per cent in April-January 2009-10) for manufacturing, while being 7.2 per cent (9.4 per cent) for mining and 5.3 per cent (5.6 per cent) for electricity.
Capital goods decline
Within manufacturing, the segment that has shown the worst performance in January is capital goods, which has recorded an 18.6 per cent year-on-year decline. This negative growth – compared with a 57.9 per cent growth in the same month of last year – is significant given that capital goods production is seen as a proxy for investment activity in the economy.
Among other subsectors, output of consumer durables have gone up by 23.3 per cent (against 28.2 per cent in January 2010), with these being 6.9 per cent (minus 7 per cent) for consumer non-durables, 7.6 per cent (11.5 per cent) for basic goods and 7.9 per cent (22.2 per cent) for intermediate goods.
During April-January, capital goods production grew by 12.3 per cent (against 16.1 per cent during the 10 months of 2009-10), basic goods grew 6.5 per cent (6.7 per cent), intermediate goods 9.1 per cent (13.4 per cent), consumer durables 21.6 per cent (23.2 per cent) and consumer non-durables 1.4 per cent (0.4 per cent).