April-November industrial growth still a strong 9.5%

The growth rate of industrial production plummeted to a dismal 2.7% during November, in the wake of a flagging momentum in manufacturing and mining sectors and due to a setback in basic goods, intermediate goods and consumer goods in terms of the use-based classification of the representative index that serves as a proxy for the performance in the factory sector.

In power generation, however, the tempo had accelerated to 4.6% during the month from 1.8% a year ago; likewise, in capital goods, it had improved to 12.6% from 11%.

The disappointing show, coming on top of a 11.3% jump during October 2010, may stem from two reasons.

In part, it could be statistical. In November 2009, the industrial index was up also by a hefty 11.3%. Thus, the high base might have had a drag-down effect during the same month of 2010.

Further, with factories going in to a overdrive to meet the festive demand - which is reflected in the preceding month’s hump - some slackening was only to be expected.

Even so, the spurt of a mere 2.7% during November 2010 is way below the street estimates which were in the region of 5-6%.

Of the 17 industry groups at the two-digit level of classification,  as many as eight have clocked a negative growth rate ( three, a year ago ) while the number of industries posting a rise of 8% and more has fallen to four from nine.

The plunge in the growth rate in manufacturing - to 2.3% from last year’s 12.3% - is rather sharp; similarly, from the use-based classification of the index, it is evident that, in the pivotal consumer goods segment, production has declined by 3.1% in contrast to a spurt of 10.1% in November 2009.

In both basic goods and in intermediate goods, a let-up in production is clearly in evidence now as compared to the year ago. 

Among the star performers during this month were transport equipment (15.6%), leather goods (12.6%) and basic metals (8.6%).

Laggards included basic chemicals (-2.8%), metal products (-0.8%) and wood & furniture ( 27.4%).

However, the secular trend in  industrial growth rates during the current fiscal year is satisfactory.

During the period, April- November 2010, the incremental rate of works out to 9.5%; this is higher than the similar average of 7.4% for this period of 2009-10.

In the two important areas - capital goods and consumer durables - the performance is very gratifying. In the case of capital goods, the average growth rate thus far is of the order of 22.5% (6.6% in the previous fiscal ) and in consumer durables, the growth rate continues to be in double-digits at 21.7% ( 20.6% ).

With demand for investment goods and consumer durables strong, the industrial growth during 2010-11 may be expected to in the vicinity of ten per cent.

That the industrial outlook for the year is good can also be adduced from the broad-based nature as well as the high rate of the average growth thus far. In respect of as many as eight out of the 17 industry groups, the average increase in production during the April -November period of 2010-11, had exceeded 10%.

Among them were transport equipment (27.3%), metal products ( 22.1% ), machinery & equipment (16.8% ) and cotton textiles (10.1%).

On the other hand, only two industries - beverages etc and wood & furniture - have posted a negative growth rate.