Industrial output rebounds in Sept

Will tumble in October, economists warn.

Industrial production grew 4.8 per cent in September, below 7 per cent in the same month last year but well above 1.4 per cent in August, though experts warned October numbers could be bad as it was in this month that the financial crisis brought the money markets to a standstill.

Stock market indices, which had clawed back into the positive territory after the Index of Industrial Production (IIP) was released by the Central Statistical Organisation at noon, retreated soon after in anticipation of an industrial slowdown in October. The BSE Sensex ended the day three per cent down at 9,536.33.

The index grew in September mainly because factories ramped up production to meet the festival season demand in October. The capital goods sector grew 18.8 per cent during the month, consumer durables 13.1 per cent, basic goods (industrial raw material) 4.6 per cent and consumer non-durables 2.8 per cent. However, intermediate goods like paints and chemicals fell 3.3 per cent.

“After the poor results reported for the month of August 2008, the quick estimates of IIP for the month of September 2008 are more encouraging,” Finance Minister P Chidambaram said. “I say this even while I maintain that data collection must be improved and made more relevant, contemporary and universal.”
 

TROUBLE AHEAD? IIP growth (%) in September 2008
Sector	7-Sep	8-Sep	Overall  Apr-Sept 07-08	Overall  Apr-Sept 08-09
Mining	4.9	5.7	4.9	3.8
Manufacturing	7.4	4.8	10	5.2
Electricity	4.5	4.4	8	2.5
Overall	7	4.8	9.5	4.9
Source: CSO

But economists warned that October IIP would be lower as factories have downsized production and exports have shrunk. “IIP growth till September does not encapsulate adverse factors like credit market disruption, preliminary signs of export growth shrinkage and lesser growth in excise and customs collections,” said Yes Bank Chief Economist Shubhada Rao.

“This growth (in September 2008) is difficult to sustain or pick up in the coming months in view of the production cuts recently announced by some of the major companies in the real sectors,” Federation of Indian Chambers of Commerce and Industry General Secretary Amit Mitra added.