IIP up 9.8% in June, capital goods log 20% growth

Even as the index of industrial production (IIP) increased by 9.8% on a year-on-year basis in June 2007, sequential data shows that it has been decreasing at a steady rate for the past four months.

Latest data released by Central Statistical Organisation today showed that growth in industrial production in March 2007 stood at 14.5%, dipping to 12.38% in April and 10.92% in May.

Analysts maintain that the slowdown in industrial production has been caused by the manufacturing sector, growth in which has also shown a dip in the past few months. Manufacturing, which comprises nearly 80% of the industrial production, grew by 10.6% in the month, compared to 11.7% in May and 13.67% in April this year.

"The June growth figures are not very low, but on a monthly basis it has shown a dip. The economy is showing signs of moderate slow down. This is because of the hike in interest rates as well as the appreciation of the rupee against the dollar," Abheek Barua, chief economist, HDFC Bank, said.

Electricity production registered a growth of 6.8% in the month, which is also the lowest in the past three months. Mining sector registered a growth of 3.6%.

"In the coming months, we would see moderate rate of growth of industrial production and the average for this year could be 9.6%," Barua added.

Growth in the consumer goods segment stood at 4.15%, which is the lowest in the past three months. Growth in consumer non durables during the period dipped to 0.48%, while it was 3.47% in May and 5.21% in April. Analysts maintain that consumer goods sector has been perennially plagued with problems like over penetration.

However, the capital goods sector showed a robust growth of 20% in June while intermediates growth dipped to 8.3%. Basic goods production during the month stood at 8.5%.

The woods and wood products sector showed the highest growth of 103.9%, followed by a 35% rise in production of Jute and other vegetable fibers during June.