Industrial output clocks poor growth

Industrial output clocks poor growth

The dismal performance in the capital goods sector and stagnating consumer durables demand translated into a slower-than-expected rise of 2 per cent in the Index of Industrial Production (IIP) output during April 2013 from 3.4 per cent in the previous month.

Quick estimates from the Ministry of Statistics and Programme Implementation (MOSPI) on Wednesday indicated that the IIP growth was lower than the market expectations of 2.5 per cent.

The consumer durables segment had registered one of its highest falls since 2009 in April and industry leaders called for moderation in interest rates to stimulate demand.

Describing the IIP in April as “disappointing,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “The growth rate that has come out today is low. There is a slight upturn, but it’s not strong enough.”

The subdued IIP growth was higher than the 1.3 per cent contraction in industrial output in April last year, but is still lacklustre as it comes on the back of a low base, said Bhupali Gursale, an economist at Angel Broking.

Output from the eight core industries, which constitutes nearly 38 per cent of industrial output, declined to 2.3 per cent in April from 3.2 per cent in the previous month. A fall in coal, natural gas and fertiliser production was largely responsible for the slowdown.

Manufacturing growth, which constitutes over 75 per cent of the index, remained weak at 2.8 per cent in April and came from only a handful of industries. It had declined a mere 1.8 per cent a year ago.

The output of the top 5 industries in terms of contribution to manufacturing growth grew by 22.3 per cent compared to a year ago, while the output of the remaining 17 industries fell by 3.7 per cent.
 
“The weak and highly concentrated growth within the manufacturing sector is a major concern. The revival of the manufacturing sector is crucial for the recovery of the service sector given its positive spillovers to sectors such as trade, transport and finance,” CRISIL said in a note to its clients on Wednesday.

Crude oil and natural gas production in May declined 1.2 per cent and 17.4 per cent respectively, despite reporting a contraction in the previous year.

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