Investment growth high in 2009-10 output fell 13.75%

Recovering from the impact of global financial crisis in the second half of 2009-10, Indian industry unleashed pent-up investments in the economy. Investments grew by 25.86 per cent in 2009-10 against just 19.92 per cent and 19.47 in 2008-09 and 2007-08, respectively.

Also, fixed capital growth was up at 27.97 per cent from 24.95 per cent and 18.18 per cent over the period.

“In the second half of 2009-10, there was a huge increase in capital goods production due to companies' long-term investment, which was frozen. Increase in fixed capital is reflected in the growth in investment, and 28 per cent is highly remarkable,” chief statistician T C A Anant told reporters while releasing the Annual Survey of Industries (ASI) for 2009-10.

However, the growth in value of output was down to 13.75 per cent in 2009-10 compared to 17.9 per cent in 2008-09 and 15 per cent in 2007-08 since investment and fixed capital has a lag effect. Similarly, growth in the number of factories was up by 2.29 per cent from 6.10 per cent and 1.2 per cent over the periods.

The survey provides information on factories registered under the Factories Act, 1948, and Bidi and Cigar establishments registered under Bidi and Cigar Workers Act, 1966.

ASI provides a more reliable data compared to Index of Industrial Production (IIP), as it is based on the companies’ audited data.

“ASI data growth is always higher than IIP, as in IIP you have a fixed set of of entities which can report on monthly basis. These are big companies, while it is the smaller companies which report higher growth,” said Anant.

On volatility of IIP data, he said, it is impacted by production volume volatility, unlike the prices. For example, he said, strike by workers in Maruti had cut its production of cars dramatically.

IIP grew by 5.3 per cent in 2009-10, compared to just 2.5 per cent in 2008-09 and 15.5 per cent in 2007-08.

According to the ASI data, growth in workers, signifying employment at lower level, also declined to 4.35 per cent from 7.06 per cent and 4.03 per cent over the periods.

As a consequence, growth in wages to workers declined to 15.34 per cent from 17 per cent and 15 per cent over the respective periods.

It means, the impact of global financial crisis in terms of workers employed and wages was felt in 2009-10, while companies switched over to capital more vigorously.

The data also showed that net value added by Indian companies rose to 10.28 per cent from 9.59 per cent growth and 21.70 per cent over these periods.

The fuel consumed to output ratio declined to 0.04 in 2009-10 from flat 0.05 during the past five years indicating better fuel efficiency.

Tamil Nadu topped the pack on various fronts. It had the highest number of factories at 16.9 per cent of total such units in India in 2009-10, followed by Maharashtra at 12.2 per cent and Andhra Pradesh at 10.8 per cent.

In terms of employment, Tamil Nadu also had the highest percentage share in all-India employment figure at 16 per cent, followed by Maharashtra at 12.8 per cent and Gujarat at 9.6 per cent.