The government’s hopes of industrial growth showing recovery from January may stand dashed after the release of the latest set of data.
Output of eight core industries, which have close to 38 per cent weight in the Index of Industrial Production (IIP), grew just 0.5 per cent in January with four of the sectors showing negative growth.
Economists now even cast doubt at 6.9 per cent economic growth calculated for this fiscal by advance estimates.
When growth in these eight core industries fell to 0.3 per cent in October, industrial production contracted by 4.7 per cent. In November, industrial growth recovered to 5.9 per cent, only to go down to 1.8 per cent in December.(Click here for graph)
Industrial growth data will be released on March 12 for the month of January and a couple of days after RBI would come out with a monetary review. Interesting to watch would be whether inflation still remains a concern for the central bank or its moves will shift to boosting growth.
Most policy makers had hoped the January-March quarter to post recovery in industrial growth. But the eight core industries showed almost flat growth against 6.4 per cent in the same month last year. In the previous month of December 2011, eight core industries had grown by 4.6 per cent. In fact, month-on-month, the index of the core industries contracted 0.20 per cent in January.
Four sectors — crude oil, natural gas, refinery products and steel — recorded contraction in production. Electricity, which was a silver lining in industry, turned out to be a dampener this time, growing just 2.4 per cent. In December, electricity grew 8.9 per cent, and in the first 10 months it has recorded a growth of 8.6 per cent.
In fact, three sectors — coal, natural gas and fertilisers — recorded negative growth in April-January, 2011-12. Coal recorded a sharp recovery, growing by a robust 7.5 per cent in January. Industry is already expected to pull down the GDP growth in the third quarter, data of which will be out tomorrow.
The developments have made economists now sceptical of advance estimates’ 6.9 per cent economic growth for this financial year.
“The eight core dismal data puts a question mark on the 6.9 per cent GDP growth for 2011-12,” said Madan Sabnavis, chief economist, CARE Ratings. The 5 per cent growth in industry, calculated by advance estimates, seems unlikely now, he said.
Anis Chakravarty, director, Deloitte, Haskisn and Sells, said industrial growth may be between 1 and 2 per cent, or maybe lower than that in January. “It may even turn negative, as electricity, which was holding up the numbers till now, has also turned dismal.”
Consumer goods, which are showing up of late, are not expected to be so high that it offsets the low numbers of capital goods and electricity, said Chakravarty.
Steel output contracted 2.9 per cent in January against a vigorous growth of 8.7 per cent in December. According to experts, it is a result of general slowdown in infrastructure projects, high input cost of coking coal and falling capital. “Steel companies have not been doing well recently,” added Chakravarty.
