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In yet another indication that the economy is caught in a slow-down syndrome, the index of industrial production recorded the worst-ever performance during the current fiscal, with the growth rate plunging to a low of 1.9% in September. A year ago, the factory sector had fared decisively better by notching up an increase of 6.1%.

During the second quarter of 2011-12, industrial performance has been consistently poor; in July, the spurt was a meagre 3.8% which had dipped even lower in August to 3.6% and further to the dismal 1.9% in the following month.

In contrast, the showing was certainly more respectable during the first quarter, at 5.3% in April, 6.2% in May and 9.5% in June.
Consequently, the average industrial growth dropped to 3.1% during the July-September period from 7% during the April — June quarter; this has, in turn, led to a marked slow-down in the production of the factory sector during the first half of the current year — to 5% from a high of 8.2% during the comparable half of 2010-11.

Sector-wise, the debacle during September 2011 had stemmed from a setback in manufacturing — the growth had slackened to 2.1% from 6.9% a year ago — and in mining where there was an absolute decline in output to the tune of 5.6% as against a jump of 4.3%.

In electricity generation, however, the tempo had picked up sharply to 9% from 1.8%.

The use-based classification of the industrial production index throws up the disturbing fact that the industrial economy of the country has turned weak during the ongoing fiscal year, with demand for both investment goods and consumer goods at a low ebb.

In capital goods, there was a drop to the tune of 6.8% during September 2011 — a year ago, this segment had recorded a rise of 7.2% — while in consumer goods, the momentum had flagged to 3.5% from 9.7%. In respect of consumer durables and consumer non-durables, the showing was lacklustre during the month vis-a-vis the same month of the preceding fiscal.

Disturbingly enough, the intermediate goods sector — an indicator of the likely trend in industrial production — had also been an under-performer during September 2011. This group had witnessed an increase of a mere 1.5% in production during the latest month, trailing last year’s 4.6%.

In respect of basic goods, the trend was a shade better, with the rate of production improving to 4.5% from 3.5% a year ago.
Taking in to account the movements in the index of industrial production during the first six months of the current year, it is clear that the industrial sector is mired in a recession of sorts and this malaise is generally across-the-board.

Of the three sectors, in the key manufacturingsegment and in mining, the average growth had suffered a setback compared with last year - to 5.4% from 8.8% in manufacturing and to —1% from 7.2% in mining.

Only an vastly improved pace in power generation had saved the overall industrial growth rate for the first half from being less than 5% that was recorded.

Similarly, in the three broad groupings of the industrial index from the use-based classification - capital goods, intermediate goods and consumer goods - the average growth during the April- September 2011 period was below what it was during the same half of 2010-11; the setback in capital goods, intermediate goods and consumer goods, at 4.6%, 1.4% and 4.5%, respectively, was very pronounced in relation to the year ago figures.

Basic goods production has bucked the trend by registering a faster growth of 6.9% so far this year than 4.7% during the same half of the preceding fiscal.

Though the industrial growth during September 2011 and the first six months had been worse than expected, the scenario is unlikely to change for the better in the second half of this fiscal year.

Rather, with global economic indicators pointing to difficult times ahead and domestic economy battling with high inflation, an investment slack and stiff interest rates, the months ahead may prove to be a tough going for industry as well.

Any hope of the Reserve Bank of India easing its dear money policy to alleviate the hardships of the industrial sector may be ill-founded.

The central bank has time and again stated that it accords a very high primacy to subdue the inflation monster even if it means some setback to economic growth.

In this game plan, an industrial slowdown engendering a setback to economic growth during the year, has already been factored in. In all probability, RBI may press the pause button, for now, notwithstanding the weak industrial output data.