Industrial output in positive zone after 3 months

Having declined for three months in a row, industrial production  expanded by 0.1 per cent in January even as manufacturing woes continued, official data showed on Wednesday. Industrial output remained stagnant in the first 10 months of the current  financial year, compared to 1 per cent growth in the corresponding period of the previous financial year.  

The data came a day after merchandise exports declined  3.67 per cent in February, for the first time in eight months.

Manufacturing output declined for the fourth consecutive month in January. This sector, which occupies over 75 per cent weight in the Index of Industrial Production (IIP), fell by 0.7 per cent compared to a 1.2 per cent decline a month ago.

Within manufacturing, consumer durables and capital goods persisted with a fall in output.

Consumer durables output, which has been declining since December 2012, continued its downward trend in January as it went down by 8.3 per cent compared to a 16.1 per cent fall in December.

Experts attributed this to inflationary burden. “This is a key concern. Inflation definitely has a wider role to play on this discretionary consumption level,” said YES Bank chief economist Shubhada Rao.

Problems in consumer durables could be gauged from the fact that even excise duty cuts helped car sales to rise by just 1.39 per cent in February, the first increase since September.

Full impact of the cuts might be visible in March as half the month was over when these were announced in the interim Budget. Capital goods in January contracted for the third straight month as production declined by 4.2 per cent against a 2.5 per cent fall in the previous month. Electricity continued to post a decent performance as it grew 6.5 per cent in January, albeit a bit lower than 7.5 per cent a month  ago. Mining rose for the third straight month, by 0.7 per cent.

“Although mining continued to be a drag throughout the year, trends in recent months show that coal-related issues are getting resolved, which is a positive,” said Rao.

Even as industrial production managed to grow,  this might not be sufficient to push the economy to 4.9 per cent growth in 2013-14, as pegged by the advance estimates of the Central Statistics Office (CSO). For the first nine months, the economy grew 4.6 per cent.

Soumya Kanti Ghosh, chief economic adviser of the State Bank of India, said the estimates projected by the CSO might not be achieved.

The CSO estimated industries to grow by 0.7 per cent in 2013-14, in value terms. Rao said the slowdown would continue till the second half of the next year, “when there could be a very gradual recovery”.