Surpassing street expectations, the index of industrial productionencompassing the mining, manufacturing and power sectors, rose by 5.9% in November — the fastest since June.
This has raised hopes that the contraction of 4.7% seen the preceding month may be an aberration and one can expect positive tidings in the remaining months of the current year.
Though this order of industrial growth is still lower than the spurt of 6.4% recorded during the same month a year ago, it nevertheless comes as a booster of sorts for the beleaguered economy.
Ironically, it may induce the Reserve Bank to adopt a “stay-the-course” stance in its ensuing policy review till the price front emits positive signals that inflation is indeed moderating. The latest news on the industrial front, ironically, may have rendered slim any chances of an interest rate cut.
The gratifying industrial performance during November was led by the manufacturing and power segments and this had more than offset the disappointing show in mining.
The incremental growth in manufacturing was 6.6% against 6.5% exactly 12 months earlier, and in electricity generation, it was an impressive 14.6% against 4.6%. In mining output, there was a sharp drop of 4.4% in contrast to a jump of 6.9%.
In terms of use-based classification, the consumer goods had fared exceptionally well during November 2011. Overall, the production in this pivotal group had soared by 13.1% from 0.7% over the year; in durables and non-durables, the momentum had accelerated sharply to 11.2% and 14.8%, respectively now.
Even taking into account the depressed base, the consumer goods industry has shown a robust growth during the latest month. In the case of basic goods, the growth rate had improved to 6.3% from the earlier 5.7%.
But, in both intermediate goods and capital goods, the trend in output during November was rather tepid; in the former, the tempo had slackened to 0.2% from 4.3% last year and in the latter to -4.6% from 25.7%.
Based on the growth rates of the various components of the industrial index sectorally and in terms of the use-based classification, an inference is possible that the overall factory production may register moderate increases during the remaining months of the current fiscal year.
The flagging output in mining as well as in investment goods and intermediate goods may act as speed-breakers.That is to say, while an industrial recovery may be on the cards, this recovery may be fragile. In turn, this may impact economic growth rate, now reckoned in the vicinity of only 7%.
This interpretation of the November numbers is also supported by the fact that, for the first eight months of 2011-12, the industrial growth rate had slumped to 3.8% from 8.4% during the same period of 2010-11.
More important, in respect of the heavyweight in the index, manufacturing, the growth rate for this period has slumped to 4.1% from 9%. In mining, too, the secular trend thus far has shown a decline of 2.5% in contrast to a surge of 7% a year ago.
Similarly, barring basic goods where the average growth has been faster at 6.2% this fiscal than the previous year’s 5.4%, in the case of capital goods, intermediate goods and consumer goods, there has been a distinct sign of slowing down in production during the April-November 2011 period as compared to the same period of the previous year.
This again supports the hypothesis that, while industrial growth will be positive during this year, the rate of expansion in factory output will be depressed.
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