Industrial growth slips

Slowdown in manufacturing and dip in power sector hit growth.

Industrial growth slipped to 4.9 per cent in February 2005, significantly below the 8.3 per cent growth reported in February 2004. The growth is the lowest reported so far this fiscal.

In the April-February period, the industrial sector grew 8.1 per cent in 2004-05 "" the strongest expansion in nearly nine years "" compared with 6.9 per cent in the first eleven months of 2003-04.

"The investment side, represented by capital goods and machinery and equipment, has reported a slowdown, from double-digit to single-digit growth. This needs to be watched. While it is too early to say that a cyclical downtrend has started, it does seem to be spread across categories," said DK Joshi, senior economist, Crisil.

Industrial growth for January 2005 was revised downwards to 7.5 per cent against 8 per cent reported in the previous month.

The lower growth in February was on account of a slowdown in manufacturing growth to 6.2 per cent from 7.6 per cent in the corresponding month in 2004, and a dip in production in the mining and electricity sectors, compared with the levels in February 2004.

"The dip in manufacturing growth is sudden. Chemicals, metals and machinery and equipment are the three sectors which have contributed to the slowdown in the manufacturing growth rate. Chemicals alone have contributed 60 per cent to the slowdown," said Joshi.

In the first eleven months of 2004-05, the manufacturing sector grew 8.7 per cent against 7.3 per cent in the corresponding period last year. The mining and electricity sectors reported 4 per cent and 5.3 per cent growth, respectively, against 5.3 and 4.5 per cent in the corresponding period last year.

The dip in industrial growth was expected, as the index of six core infrastructure industries, which account for about 30 per cent of the index of industrial production (IIP), fell by 0.6 per cent compared with the level in February 2004.

Electricity production dipped by 0.9 per cent in February 2005 compared with 12.9 per cent growth in February 2004, while mining output fell 2.3 per cent compared with the level in February 2004. Growth in the mining sector during February 2004 was 10.7 per cent.

"This is the second month in a row that growth has decelerated in the mining, electricity and machinery and equipment sectors," Joshi said.

As per the use-based classification, growth in basic goods and capital goods dipped sharply. The basic goods sector reported 0.8 per cent growth in February 2005, against 10.3 per cent in the corresponding month last year.

The capital goods sector reported a 4.5 per cent growth, down from 27.8 per cent in February 2004. The consumer goods sector grew 11.2 per cent in February 2005 against 3 per cent in February 2004.

Consumer durables grew 14.2 per cent, on top of 17.4 per cent growth in the corresponding period last year, while non-durables production rose 10.2 per cent against a dip of 0.7 per cent reported in February 2004.