The poor show by capital goods and intermediate goods sector might be indicative of a broader slowdown trend that could weigh on the central bank’s mind as it decides whether the risks on this count would offset concerns over persistent inflation.
Industrial growth plunged to a 21-month low of 3.3 per cent in July. The number is significant, as it comes ahead of the Reserve Bank of India's monetary policy review meeting on Friday that is expected to take a call on interest rates whether to raise them further or press the pause button.
The 3.3% YoY increase in the official Index of Industrial Production the lowest since the 2.3% of October 2009 has come mainly from capital goods, the output of which dipped 15.2%. This manufacturing sub segment has, in fact, been showing huge volatility, having grown by 38.2% in June. But apart from capital goods, a proxy for investment activity in the economy, even intermediate goods registered a negative growth rate of minus 1.1% in July.
The Quick Estimates of Index of Industrial Production with base 2004-05 for the month of July 2011 have been released by the Central Statistics Office of the Ministry of Statistics and Program Implementation. The General Index for the month of July 2011 stands at 166.6, which is 3.3% higher as compared to the level in the month of July 2010. The cumulative growth for the period April-July 2011-12 stands at 5.8% over the corresponding period of the previous year.
The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of July 2011 stand at 126.7, 176.0 and 152.1 respectively, with the corresponding growth rates of 2.8%, 2.3% and 13.1% as compared to July 2010. The cumulative growth in the three sectors during April-July, 2011-12 over the corresponding period of 2010-11 have been 1.1%, 6.0% and 9.4% respectively, which moved the overall growth in the General Index to 5.8%.
In terms of industries, 15 out of the 22 industry groups in the manufacturing sector have shown positive growth during the month of July 2011 as compared to the corresponding month of the previous year. The industry group ‘Office, accounting & computing machinery’ has shown the highest growth of 38.3%, followed by 18.9% in ‘Basic metals’ and 17.5% in ‘Other transport equipment’. On the other hand, the industry group ‘Electrical machinery & apparatus n.e.c.’ has shown a negative growth of 46.0% followed by 12.5% in ‘Medical, precision & optical instruments, watches and clocks’.
As per Use based classification, the growth rates in July 2011 over July 2010 are 10.1% in Basic goods, (-) 15.2% in Capital goods and (-) 1.1% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 8.6% and 4.1% respectively, with the overall growth in Consumer goods being 6.2%.
Some of the important items of capital goods showing highly negative growth during the current month and thus contributing to the low growth of the overall index for the month include ‘Cable, Rubber Insulated’ [(-) 64.9%], ‘Cement Machinery’ [(-) 62.8%] and UPS/Inverter/Converter’ [(-) 55.9%]. However, some important items of the Capital goods are also showing significant positive growth. These are: ‘Computers’ (47.1%), ‘Textile Machinery’ (36.0%), ‘Ship Building & Repairs’ (34.9%), ‘Machine Tools’ (31.6%), ‘Tractors’ (24.6%) and ‘Commercial Vehicles’ (21.8%).
The other important items showing positive growth during the month are: ‘Woollen Carpets’ (171.9%), ‘Molasses’ (88.9%), ‘Stainless/ alloy steel’ (63.0%), ‘Fruit Pulp’ (54.1%), ‘GP/GC sheets’ (50.6%), ‘Aluminium’ (43.6%), ‘Steel Castings’ (42.4%) and ‘CR Sheets’ (40.0%).
(Sourced from BL & Indian Government release)
