Durables contract, base effect lifts capital goods

With a drastic downward revision in the index of industrial production for January — to 177.9% from the provisional 187.9%, pulling down the year-on-year spurt to a mere 1.1% from the earlier figure of 6.8% — due to what it is officially described as  an “one-off error” and yet another weak performance during February, hopes of industry staging a strong recovery in the final quarter of 2011-12 have vanished.

The annual industrial growth may not be even half of what it was in the preceding year (8.2%).

According to official data, the index of industrial production had expanded by a mere 4.1% in February 2012 as against 6.7% a year ago.

This setback was largely engendered by the flagging momentum in manufacturing to 4% from 7.5% as the other two components of the index,  mining and electricity have recorded a faster pace of growth relative to the year ago at 2.1% and 8%, respectively.

In terms of the use-based classification of the industrial index, an improved tempo was seen in basic goods where the output had risen by 7.5% in February 2012, a gain of 200 basis points over the same month in 2011.

But the smart pick-up in capital goods — to 10.6% — appears to be mainly a statistical illusion as, a year ago, the production of investment goods had actually declined by 5.7%, thus depressing the base period figure unduly.

As a pointer to what is in the offing, the growth in the intermediate goods segment was down by 0.6% during the latest month in contrast to an upswing of 6.3% last year.

The pivotal consumer goods sector also had fared dismally; even factoring in  the somewhat high base period growth of 13.4%, the decline of 0.2% now is something of a let-down.

The production in the bellwether sub-group — consumer durables — has been a big dampener with a decline of 6.7% in February 2012 in contrast to a hefty spurt of 18.2% in the same month of 2011.

In regard to consumer non-durables, the deceleration has been sharp — to 5.1%  from 9.7%.

With a generally uninspiring showing in all the preceding months, the cumulative picture is rather depressing. The average growth of the index of industrial production during the April-February period of 2011-12 works out to a measly 3.5% — a far cry from the previous year’s 8.1%.

Sectorally, both mining - where the growth rate had turned negative - and manufacturing - where the pace had slackened markedly - have underperformed during the last fiscal but in power generation, there has been an upswing, to 8.7% from 5.3%.

Based on the use-based classification, only the basic goods segment had acquitted itself somewhat creditably during the first eleven months of 2011-12; the average growth was sustained at 5.9%.

In capital goods and intermediate goods, the average output for this period was down by 1.8% and  0.9%, respectively.

In the case of consumer goods, the average growth had slowed down to 4.8% from the preceding year’s 8.1%. But, as between the consumer durables and the consumer non-durables, the trend was a study in contrast in the last fiscal. While the durables production growth had slipped to 2.7% from 14.1%, the output of non-durables had quickened to 6.5% from 3.5%.