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Aided by capital goods, the rate of industrial growth rebounded to 2.5 per cent in September, compared with sub-one per cent levels in the previous two months, even as consumer durables' production continued to contract, official data showed on Wednesday.
The Index of Industrial Production (IIP) had risen 0.5 per cent each in July and August. Growth in the index was 1.13 per cent in July-September and 3.07 per cent in the previous three-month period. In the first half of the year, the rate of rise was 2.8 per cent, compared with 0.5 per cent in the year-ago period.
These numbers are expected to have an impact on gross domestic product (GDP) growth in July-September, after a two-year high rate of 5.7 per cent in April-June.
The increase in IIP in September, though, was not broad-based; it was mainly driven by capital and basic goods. The rise in production of manufactured goods in the month was 2.5 per cent, against a contraction of 1.2 per cent the previous month and 1.4 per cent in September last year.
Electricity generation in the month rose 3.9 per cent over a year ago but the rate of increase declined by about two-thirds from 12.9 per cent in September 2013. Expansion in mining also declined to 0.7 per cent in the month, against 3.6 per cent a year ago and two per cent in August.
Production of capital goods increased 11.6 per cent in September, against a decline of 6.6 per cent a year ago and 9.7 per cent in August this year. However, given that there usually is a lot of fluctuation in this segment, there is little certainty that the surge will be maintained.
More than one percentage point of 2.5 per cent IIP growth in September was accounted for by capital goods. Compared with the previous month, there would be a decline in industrial growth in September, if the capital goods segment were to be excluded.
Icra Senior Economist Aditi Nayar said: "The decline in growth of IIP ex-capital goods to 1.2 per cent in September from 2.1 per cent in August is symptomatic of the broader sluggishness in the country's economic activity."
Deloitte India Senior Director Anis Chakravarty said IIP growth in September was mainly because of orders coming with a lag. "The level of variation in capital goods is very high."
Mining might see some turnaround in the March quarter, with some of the measures the government is trying to put in place. "But a turnaround in manufacturing looks difficult, unless long-term measures are put in place," Chakravarty said.
The narrow surge in industrial production could be gauged from the fact that production of consumer durables continued to be hit by low demand. It fell 11.3 per cent in September, against a decline of 10.6 per cent in the same month last year and 14.9 per cent in August 2014. Unlike capital goods, consumer goods were consistent, but that was in their downward swing - despite phenomenal growth in certain categories, due to an earlier onset of festive season this year.
"Items like colour TV sets, air conditioners and two-wheelers recorded growth rates in excess of 40 per cent in September. That might partly be attributed to inventory accumulation ahead of an earlier onset of festive season," Nayar said.
This segment, hit hard by rising interest rates, has not expanded in the current financial year so far (except in May). However, inflation has been coming down in recent months which might have some boosting effect on the sector.
Consumer non-durables growth crawled at 1.5 per cent in September, partly due to a high base of 12 per cent expansion in the same month last year. The segment, comprising fast-moving consumer goods, had contracted 0.4 per cent in August this year.
Basic goods also expanded reasonably, at 5.1 per cent, though the rate was lower than the 6.7 per cent in September 2013 and 9.2 per cent in August this year.
Intermediate goods, which are inputs for other industries, saw a rise of 1.8 per cent in September. The rate was lower than the 4.4 per cent in the year-ago period but higher than 0.1 per cent in August.
