Factory output may have grown on core sector, low base boost

As the index of industrial production (IIP) data for October is scheduled to be released tomorrow, experts expressed subdued optimism.

The eight core sectors contributing 38 per cent to the index of industrial production (IIP) had grown 6.5 per cent in October, raising hopes of a turnaround in the factory output. However, according to economists, this is just a ‘statistical phenomenon’ and not real recovery.

Some economists pegged industrial growth at 3.3-3.5 per cent in October against (-) 0.4 per cent in September. However, the pessimists among them projected factory output to grow as low as 0.5 per cent.

Statistically, export figures provide a clue to any recovery in industrial growth. October exports contracted 1.7 per cent, and in November, by four per cent, the slowest fall since outbound shipments started declining from May.

 

Experts say there has been correlation between core sector growth and the overall IIP in recent months. For example, the eight core sectors grew 5 per cent in September, while IIP contracted 0.4 per cent that month, which according to experts, was mostly due to the poor performance of capital goods and consumer-non-durables.

However, since the core sector contributes as much as 38 per cent of the IIP, its importance cannot be overlooked entirely, said experts.