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While mining output fell three per cent in April, the straight sixth monthly decline, electricity generation rose just 0.7 per cent, which might further affect industrial growth. Manufacturing managed to grow a little over four per cent, on a low base of a decline a year before.
The data came as the government looked for industrial production numbers to show some sign of recovery, after the Index of Industrial Production (IIP) grew at a two-decade low of 1.1 per cent in 2012-13, reminiscent of the balance of payments crisis period of 1991-92. Industrial growth was 3.4 per cent in March.
The IIP growth is broadly in line with the forecasts of various economists that Business Standard had talked to yesterday. They had projected 2-2.5 per cent in April.
Details
The sluggish growth of two per cent was driven by manufacturing, which constitutes a little over 75 per cent of the IIP. It rose 2.8 per cent in April, driven largely by a base effect of minus 1.8 per cent. Manufacturing had grown 4.4 per cent in March.
Consumer non-durables largely gave impetus to manufacturing growth. Fast moving consumer goods expanded considerably by 12.3 per cent, compared to 2.3 per cent in April last year. However, consumer durables output fell sharply by 8.3 per cent in April from a growth of 5.4 per cent in the same month of 2012. According to the Federation of Indian Chambers of Commerce and Industry, this segment registered one of its steepest falls since 2009.
The divergent trend showed that demand in the economy was yet to pick up, since consumers are postponing purchases of items which could be put off, as retail inflation remained high.
Growth in other segments of manufacturing remained marginal. After recording an average of nine per cent growth in February-March, volatile capital goods rose by only one per cent in April, driven by 98 per cent growth in rubber insulated cables.
Wherever the base was a bit high, as in the case of electricity, growth was too low. Electricity generation rose 0.7 per cent, as the base was a bit high at 4.6 per cent in April 2012. This dim generation could adversely affect further industrial output. In fact, Markit Economics, a financial information agency which compiles the Purchasing Managers' Index, has time and again said that power outages are affecting the country’s manufacturing output.
Mining remained a cause for concern. Its output fell three per cent in April, despite a big low of minus 2.8 per cent a year before. It was a sixth month in a row that the output of mining, facing rough weather, declined.
There is, however, a silver lining in the IIP data. As many as 13 of the 22 industry groups in the manufacturing sector showed positive growth during April, as against 10 in March.
Ahead
Describing the growth in April as "disappointing", Planning Commission Deputy Chairman Montek Singh Ahluwalia said: "The growth rate that has come out today is low...There is a slight upturn but it’s not strong enough."
As chambers of business called for the Reserve Bank to have an accommodative policy, Ahluwalia said, "RBI is watching the situation... I hope they will make a sensible decision."
However, with retail price inflation at over nine per cent and a depreciating rupee, RBI would be in a dilemma on cutting of the policy rate. Bank of Baroda’s chief economist, Rupa Rege Nitsure, said: "Despite the weaker reading, RBI won't be able to touch the policy rates due to sticky retail inflation and the falling rupee."
After economic growth declined to a decadal low of five per cent in 2012-13, the government was looking for signs of recovery. That wait might be prolonged, said analysts.
