Import signals raise hopes of industrial growth revival

Non-oil, non-gold imports rose 22.6% in Oct

The Index of Industrial Production (IIP) might have rebounded in November due to a large rise in non-oil, non-gold imports, which signify industrial revival.

Industrial growth has been on the slow lane for three straight months. In the current fiscal year, growth had hit a high in August, at 4.5 per cent. The rate of growth had consistently fallen till October, when it registered growth of 2.2 per cent. Economists were hopeful of a reviaval when the November figures would be published.

Non-oil, non-gold imports, taken as an indicator of industrial health, increased 22.6 per cent to $27.21 billion in November. This growth was significantly higher when compared with the 4.9 per cent rise in October and even the almost 20 per cent rise each in September and August, Chief Economist at India Ratings Devendra Pant said.

Hopes of an industrial revival was fuelled by the three-month rise in non-oil, non-gold imports mostly being in segments such as coal, organic and inorganic chemicals, machinery, non-ferrous metals, iron and steel, and electronic goods — considered prime industrial inputs, economists said. Overall, imports were up by a three-month high of 19.6 per cent, a trend that might continue, they added.

This view was supported by credit ratings firm ICRA, which has pointed out that all 16 of the early volume-based indicators such as automobile production and cargo handling at ports have shown a year-on-year growth in November. The expansion in automobile production surged to a 38-month high at 19 per cent in November 2017, from a low of 2.2 per cent in October. Likewise, the growth in cargo handled at major ports rose to 4.8 per cent in November from 3.4 per cent in the previous month, in line with the sharp growth in merchandise export volumes.

Moreover, diesel consumption expanded 7.5 per cent in November, after having recorded a de-growth of 1.9 per cent in the previous month, ICRA has pointed out.

Exports grew 30.55 per cent in November, a month after it contracted 1.1 per cent, thereby breaking a 13-month recovery streak.

The November rise has, however, been attributed to a low base effect and rising commodity prices, especially that of petroleum. In fact, petroleum products, along with engineering goods, gems and jewellery and chemicals, drove nearly 80 per cent of the rise in merchandise exports in November.