Industry grows 8.8% in April

Fiscal 2005-06 started on a good note for the industrial sector, which reported an 8.8 per cent growth in April 2005, against 8.9 per cent in April 2004.

Manufacturing sector growth touched the double digit mark, growing at 10 per cent, compared with 8.8 per cent in April 2004. The mining and electricity sectors, however, reported a dip in performance.

Growth in mining fell from 9.1 per cent to 3.1 per cent, while growth in the electricity sector went down from 10.3 per cent to 3 per cent in April 2005.

Industrial growth is expected to slow down to a certain extent this year.

"It will be better to wait and watch because there are enough fundamental factors indicating that there will be a moderation in industrial growth. An export slowdown is expected because of the dampening of international growth rates. Also, there can be saturation in the housing and car markets which have seen a robust growth in the last few years," said Abheek Barua, chief economist, ABN Amro, adding that there would be a natural tendency for the growth cycle to slow down.

The figures on industrial growth in March 2005 were revised upwards, from 7.2 per cent to 8.8 per cent. This pushed up the overall growth in the index of industrial production (IIP) in 2004-05 to 8.2 per cent, against 8 per cent reported earlier.

The revision in the March figures was mainly on account of an upward revision in manufacturing growth rate in March,from 7.8 per cent to 9.6 per cent.

The growth rate for "the manufacturing industries" was revised upwards from 2.5 per cent to 12.8 per cent.

For machinery and equipment, it was up from 14.2 per cent to 17.2 per cent, for textile products, from 29.4 per cent to 40.3 per cent and for wool, silk and manmade fibre textiles, from 2.8 per cent to 11.9 per cent.

"This was probably the largest single variation in any month since 1994. The change in the March figures indicates that the low industrial growth in February (5.1 per cent) was a blip and that industrial growth is on track," said Saumitra Chaudhuri, member of the Prime Minister's Economic Advisory Council.

According to figures released by the Central Statistical Organisation (CSO), the capital goods sector reported a 24.5 per cent growth in April 2005, up from 10.1 per cent in the corresponding month last year.

Doubts, however, remain, with the yield and credit off-take numbers not supporting the manufacturing growth numbers.

"The movement in yields seems to suggest that credit offtake has slowed down and liquidity has returned to the system. I cannot reconcile that to the manufacturing growth reported in the IIP," said Barua, adding that he expected industrial growth in 2005-06 to average 7 per cent and manufacturing growth to be in the 7.5 to 8 per cent range.