UPDATE: Industry grows 1.4% in April; solid show power generation

Giving early signs of economic recovery, industrial production grew 1.4 per cent in April after contraction for months together since September when global financial crisis deepened.      

However, certain crucial sectors like consumer non- durables, including processed food products and capital goods posted negative growth. Processed food items declined by a whopping 34 per cent.     

Also, 1.4 per cent growth in factory output is no match for the 6.2 per cent expansion it clocked in the same month last year.     

Nonetheless, slowdown in industrial growth, as measured by the Index of Industrial Production (IIP), appears to be bottoming out. Provisional figures showed industrial contraction for almost every month since Lehman Brothers filed for bankruptcy in mid-September last year which deepened the global financial meltdown.     

"We have bottomed up and we are on a path of recovery," economic think-tank National Institute for Public Finance and Policy's Director Govinda Rao said.     

However, the good news on industrial production failed to enthuse the stock markets with benchmark equity index Sensex shedding nearly 153 points at 15,355 points at mid-session.      

The biggest surprise in IIP data was the electricity generation which grew by 7.1 per cent in April against 1.4 per cent in the same month a year ago.

Manufacturing, which has a weight of around 80 per cent in IIP, grew by 0.7 per cent from 6.7 per cent. Mining grew by 3.8 per cent in the month compared with 6.1 per cent in April, 2008.     

Consumer non-durable output on other hand contracted by 10.4 per cent in the period against 10 per cent growth in the same month a year ago. Capital goods production declined by 1.3 per cent against growth of 12.4 per cent.      Industry had grown by merely 2.6 per cent last fiscal against 8.5 per cent in the previous year.     

Meanwhile, the industrial growth figures for March was revised up to (-) 0.75 per cent from provisional estimates of (-) 2.3 per cent.     

As many as 11 out of 17 industry groups showed a growth. However, food products continued to contract drastically by 34.4 per cent in April. Production of another employment generating sector, leather decelerated by 12.4 per cent.     

Economists also attributed better than expected industrial figures in April to pay hikes of government employees and predicted that May and June will give better numbers as a result of increased spending during elections.     

"It is a preliminary sign of recovery...I think we are perhaps in initial stage of recovery which will pan out gradually. Pay hikes have been a big factor," HDFC Bank Chief Economist Abheek Barua said.