Industrial output showed negative growth for the second month in a row, the decline being 0.5 per cent in January, highlighting that stimulus packages failed to perk up manufacturing as well as mining so far. This is the first time in 16 years that industry shrank for two consecutive months.
As such, the partial recovery in November proved an aberration in recent months with industrial growth turning negative in October, December and January.
Manufacturing output, having a weight of around 80 per cent in the Index of Industrial Production (IIP), declined by 0.8 per cent and mining production by 0.4 per cent in January, leading to negative industrial growth against a 6.2 per cent growth rate in the same month of 2008.
However, electricity generation rose, though at a slow pace of 1.8 per cent against 3.7 per cent a year ago. This clearly showed that stimulus packages have not given industry the desired boost.
"All three stimulus packages have not picked in. The industrial production figures would not reflect their impact," Chief Statistician Pronab Sen said.
The fall in industrial production in December was not as steep as initial estimates showed last month. The revised figures show that production contracted by 0.63 per cent against the earlier estimate of 2 per cent. This gives some hope for January figures too getting better.
"Given the last three-four months' trends, it (January figures) could result in upward (movements) after revised estimates come," Sen said.
In terms of specific industries, 12 out of 17 sectors showed decline in growth in January.
The highest fall in production, 16.1 per cent, was witnessed in food products, followed by wood and wood products (15.2 per cent) and transport equipment and parts (13.4 per cent).
Among those that showed positive growth, the production of machinery and equipment other than transport was up 17.5 per cent.
With fiscal packages failing to propel industry, economists are not sure whether only the RBI's measures to ease liquidity will push up demand as there is a model code of conduct for the Government restricting the announcement of any more such measures.
Former Chief Economic Advisor to the Union Government Nitin Desai said, "The challenge for policy is demand stimulation. Monetary measures could help certain sectors like housing, but what we need is direct demand boost, and for this there should be additional fiscal measures, including direct government spending."
For the first ten months of this fiscal, industrial growth stood at three per cent, which might put a question mark on the official projection of 7.1 per cent overall economic growth for 2008-09.
Official advance estimates have pegged industrial growth to be at 4.8 per cent for the current fiscal.
There are some positive sides to the industrial story. After a long time, consumer goods, particularly durables, showed positive growth, giving some optimism for the future.
Also, capital goods industry output jumped 15.4 per cent in January against just 2.6 per cent a year ago.
But now, basic goods production contracted by one per cent and intermediate goods by 9.2 per cent.
The dismal industrial story in India is not an isolated incident in the global scenario. In fact, the Japanese economy contracted by 12.7 per cent during October-December, the fastest slowdown since 1974.
Stock markets remained unfazed with the Sensex up by over 256 points, buoyed by reports that Citi turned profitable in the first two months of 2009.
