Industry chugs along, IIP goes up 8.4%

Strong manufacturing growth of 9.3 per cent in January 2005 "" against 8.2 per cent in January 2004 "" ensured overall industrial growth remained at 8 per cent in January 2005, the same as in January 2004.

"Growth in the index of industrial production (IIP) growth has been lower than expected. Manufacturing was expected to grow at about 9.5 per cent. It may still be revised to around that level," said Saumitra Chaudhuri, economic advisor, ICRA, adding, the industrial growth figure for October 2004 had been revised up to 10.6 per cent and for December 2004 to 8.2 per cent.

As per the quick estimates of the IIP, with base 1993-94 released by the Central Statistical Organisation, the average industrial growth in April 2004-January 2005 was 8.4 per cent, against 6.7 per cent in the corresponding period last year.

In the first 10 months of the fiscal year, manufacturing has grown at 9.2 per cent, against 7.3 per cent in the corresponding period of 2003-04.

"We are seeing such sustained growth in manufacturing after a long time. It is reminiscent of the boom period of 1993-96. Demand is also buoyant, with consumer durables and non-durables reporting healthy growth," said DK Joshi, senior economist, Crisil.

The industrial growth level was maintained despite a fall in the production levels in mining from 8.7 per cent in January 2004 to 1.9 per cent in January 2005 and in the electricity sector from 6.1 per cent to 2.3 per cent.

The low growth in the electricity sector in January could be attributed to the capacity constraint at the ground level. Demand is there, but grid power is not available, Chaudhuri added.

Electricity production was at 6 per cent, against 3.4 per cent in the last fiscal year, while mining growth was at 4.6 per cent in April-January 2004-05, against 4.7 per cent in the first 10 months of 2003-04.

According to the use-based classification, capital goods reported 10.6 per cent growth, against 15.5 per cent in January 2004. "There has been some slowdown in the growth rate in capital goods and in the machinery and equipment segment. However, this is not indicative of a reversal in trend. We will have to wait and see if it persists," Joshi added.

Machinery and equipment grew at 12.1 per cent in January 2004, against 20.9 per cent in the April-January period, while the consumer goods segment grew 15.1 per cent, against 7.5 per cent growth in January 2004.

Within consumer goods, both durables and non-durables reported healthy growth, with the former growing 13.2 per cent, against 16.2 per cent in the corresponding month last year and non-durables growing 15.6 per cent on top of the 5.1 per cent growth in January 2004.

In January, 14 of the 17 two-digit industry groups showed positive growth, compared with the corresponding month of the previous year. Jute and other vegetable fibre textiles, except cotton, have shown the highest growth of 59.1 per cent, followed by 30.8 per cent in textile products, including apparel, and 17.9 per cent in other manufacturing industries.

The lowest growth was reported by wood, furniture and fixtures, where production fell by 16.7 per cent, followed by a decline of 2.9 per cent in production of rubber, plastic, petroleum and coal products and a 0.8 per cent decline in wool, silk and man-made fibre textiles.