After pre-Diwali surge, industrial output shrinks

Industrial production declined marginally in November, by 0.1 per cent, against six per cent growth in the same month a year ago. This was after a 8.3 per cent growth seen the previous month and raised hopes of a rate cut by the Reserve Bank of India (RBI) in its monetary policy review on January 29.

Continued problems in the mining sector, coupled with lacklustre manufacturing and electricity generation slowed industrial growth, which stood at one per cent in April-November, against 3.8 per cent in the corresponding period last year. Industrial production has seen contraction in five of the eight months of 2012-13 for which data are available.

Economists and policy makers had earlier said the robust growth seen in October had masked many facts and expected only marginal growth in November. Typically, the month before Diwali sees a surge in industrial activity due to higher demand; the drop is being attributed mainly to the festival falling in November in 2012.

The policy makers, however, still say that the worst is over for the economy.

“These data do not contradict the proposition that the economy has bottomed out. It now needs to move upwards. You need to see what December is like,” Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters.

Since the pre-Diwali month is generally an aberration to the trend, the average of industrial production in October and November might give a clearer picture. This financial year, the average stood at 3.99 per cent, against 0.36 per cent last year.

In November, none of the broad sectors registered a spectacular rise in production. Mining output contracted 5.5 per cent against a fall of 3.5 per cent a year ago. Mining has seen a decline in six of the eight months this year. Manufacturing, which has a 75 per cent weight in the Index of Industrial Production, the highest, inched up 0.3 per cent in November, against 6.6 per cent in the month last year. Thirteen of the 22 industry groups declined in November, compared with five the previous month.

Meanwhile, another set of data released on Friday showed the country’s exports had contracted 1.92 per cent in December to $24.8 billion, compared to the same month last year. Imports increased 6.3 per cent to $42.5 billion, widening the trade deficit in the month 20 per cent to $17.7 billion. This has put pressure on the country’s current account deficit, now expected to widen further in the third quarter from an all-time high of 5.4 per cent of gross domestic product in the July-September quarter.