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| Oct industrial output grows by 10.3% |
| BS Reporter / New Delhi Dec 12, 2009, 00:46 IST |
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Significant growth in the manufacturing sector pushed the industrial output up by 10.35 per cent in October, higher from the revised growth rate of 9.6 per cent the previous month, fuelling expectations that the economy is firmly on the path of recovery.
The growth rate has been marginally lower than the forecasts of around 11 per cent by economists, though most of them maintained that the positive trend in industrial growth would continue.
At the peak of recession in October 2008, the index of industrial production (IIP) rose by a mere 0.1 per cent. “The IIP figures for October (2009) are lower than the average forecast. The positive momentum, however, has continued. It will be in the range of 9-11 per cent by the end of this financial year. The positive factor in the data is that the growth is more broad based. Low base has also been a factor,” said Shubhada Rao, chief economist with Yes Bank.
With less than anticipated industrial growth rate, economists expect that a hike in policy rates like repo and reverse repo might be deferred till April 2010, though most expect a hike in cash reserve ratio (CRR) by January. “CRR rate will be raised in January as inflation has become RBI’s major concern. However, rise in policy rates might be deferred till January,” added Rao.
The cumulative growth for the April-October 2009-10 stands at 7.1 per cent as against 4.3 per cent during the corresponding period in the previous year. Manufacturing growth, which had declined by 0.6 per cent in October 2008, grew by 11.1 per cent during October this year. Growth in mining and electricity accelerated to 8.2 per cent and 4.7 per cent, respectively, from growth rate of 3.2 per cent and 4.4 per cent during the corresponding period in 2008.
Double digit growth in manufacturing was stimulated by a 21 per cent rise in production of consumer durables during the month. Growth in production of consumer non-durables also accelerated to 8.1 per cent in October. The production of consumer durables and non-durables had declined by 1.6 per cent and 0.6 per cent, respectively during the corresponding month of October in 2008.
“What is to be noted is that manufacturing sector has clocked a double digit growth pushed by a sizzling performance in the consumer durables segment that grew by a robust 21 percent in October 2009 as against a slide in performance a year ago. This growth in manufacturing, particularly in the consumer durables sector, can be attributed to the low interest rate regime that was introduced in October last year. Any reversal of that stance will hit the growth momentum and bring down industrial performance,” said Harsh Pati Singhania, president of Federation of Indian Chambers of Commerce (Ficci).
Consumer goods registered an impressive growth of 11.8 per cent as against a decline of 0.9 per cent in October 2008. Production of basic and capital goods grew by 5 per cent and 12.2 per cent respectively while intermediate goods registered a growth rate of 14.3 per cent during the month.
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