Feb industrial growth dashes recovery hopes

IIP posts 0.6% expansion; capital goods up 9.5%

Policymakers looking for green shoots of recovery in the fourth quarter of 2012-13 would be disappointed, with industrial production barely managing to show growth.

Despite a low base of 175.2 points in February last year, the Index of Industrial Production (IIP) for the month in 2013 posted a mere 0.6 per cent year-on-year expansion to 176.2 points, data released on Friday showed. Industrial growth was 4.3 per cent in February 2012. However, the growth seen in capital goods, at 9.5 per cent, was significant, against 10.5 per cent in the year-ago period.

“I am glad IIP growth is not negative,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said. “It is very low, not anything one can point to as indicating a robust return of growth.” (Click for chart)

For the first 11 months of 2012-13, industrial production grew 0.9 per cent, against 3.5 per cent in the corresponding period of the previous financial year, official data showed.

The undercurrent of factory output, as shown by IIP, does not reflect a recovery. Electricity generation, which has been providing strong support to industrial growth, contracted 3.2 per cent in February. This was the first such instance after the new series of the index, with base year of 2004-05, was launched. Mining output fell 8.1 per cent in February, reflecting the problems in the sector. Manufacturing, which constitutes 75 per cent of IIP, helped growth remain in positive territory.

Within manufacturing, capital goods provided support to IIP. It rose 9.5 per cent, against 10.5 per cent in the year-ago month. This was the second time in 2012-13 that capital goods output showed growth. This is too volatile a segment, and does not follow the trend. So, analysts said, sustainability of growth cannot be based on this segment. Consumer non-durables showed an expansion (2.9 per cent) in February. All other segments were in the negative zone.

MARCH IIP OUTLOOK

• PMI manufacturing falls to 16-month low of 52 points in March
• Passenger car sales down 22.5% in March year-on-year
• March base of IIP is too high, at 187.6
• Index has to rise 11.4 points from February to show zero growth