Recovery hopes recede as IIP growth slips to 0.5% in July

Recovery hopes recede as IIP growth slips to 0.5% in July

Dashing hopes of quick recovery, industrial output for July slowed to 4-month low growth rate of 0.5 per cent due to contraction in manufacturing and poor offtake of consumer goods, though retail inflation for August eased marginally to 7.8 per cent.

Factory output, as measured by the Index of Industrial Production, had grown by 2.6 per cent in July last year.

For the first four months of 2014-15 fiscal, IIP has recorded 3.3 per cent growth, as against a contraction of 0.1 per cent in the April-July period of 2013-14.

"The muted performance of industrial sector...indicates that full fledged industrial recovery could still be some distance away. However, anecdotal evidence suggests some pick- up in new orders," CII Director General Chandrajit Banerjee said, adding that a sustained recovery would be indicated by an improvement in off-take of commercial credit.

Reserve Bank of India, which has maintained an hawkish stance on interest rate, is scheduled to announce the next monetary policy on September 30.

As per the IIP data, only 12 of the 22 industry groups in manufacturing showed positive growth in July.

The data on retail inflation suggested that easing prices of vegetables, cereals and petroleum products brought down retail inflation marginally to 7.8 per cent in August.

Consumer Price Index (CPI) based retail inflation was at 7.96 per cent in July. In August 2013, it was 9.52 per cent.

However, food inflation last month rose to 9.42 per cent over 9.36 per cent in July, an official release said today.

The rate of price rise in vegetables stood at 15.15 per cent in August, as against 16.88 per cent in July. The rate of price increase in cereals and its products turned lower at 7.39 per cent and that of fuel and light came down at 4.15 per cent.

Meanwhile, IIP for June has been revised upwards to 3.9 per cent from the provisional estimates of 3.4 per cent, according to data released by the Central Statistics Office.

Manufacturing - which constitutes over 75 per cent of the index, contracted by 1 per cent in July, compared to 3 per cent growth in output a year ago. For April-July, it has grown at 2.3 per cent, compared to 0.1 per cent contraction in the year-ago period.

FICCI President Sidharth Birla said: "While we were hoping that slowdown in manufacturing had bottomed out, it appears from July numbers that manufacturing may not out be out of the woods. It is worrying that deceleration in July is somewhat broad based extending to consumer durables and capital goods."

The consumer goods output contracted by 7.4 per cent in July compared, to 0.7 per cent contraction logged a year ago. For April-July, the segment shows a contraction of 4.5 per cent, compared to a decline of 1.8 per cent in the same period of 2013-14.

The consumer durables segment declined by 20.9 per cent in July, as against a dip of 9.6 per cent a year ago. For April- July, it declined 12.5 per cent as against a dip of 11.9 per cent in the four month period of last fiscal.

However, the consumer non-durable goods output grew at 2.9 per cent in July, compared to 7.4 per cent in same month last year. During April-July, the segment has grown at 1.3 per cent compared to 7.2 per cent in same period last fiscal.

According to the CSO data, production of capital goods, a barometer of demand, contracted by 3.8 per cent in July, in sharp contrast to a growth of 15.9 per cent in same month of last year.

For the April-July period, the capital goods output has grown by 8.5 per cent, compared to 1.4 per cent in the first four months period of 2013-14.

"Focus on structural reforms in terms of ease of doing businesses, simplification of tax structure and focus on industrial infrastructure would be critical to revive and sustain manufacturing growth trajectory in the coming times," said PHD Chamber President Sharad Jaipuria.

The mining sector meanwhile grew at 2.1 per cent in July as against a dip of 3 per a year ago. For April-July, the segment grew by 2.8 per cent, compared to decline in production by 4.3 per cent in the year-ago period.

Power generation increased by 11.7 per cent in July as compared to 5.2 per cent growth a year ago. In April-July, power output grew by 11.4 per cent compared to a growth of 3.9 per cent in the same period a year-ago.

Output of intermediate goods expanded 2.6 per cent in July, compared to 3.2 per cent a year ago. For April-July the output has grown by 2.8 per cent, compared to 2.1 per cent growth in the first four months of last fiscal.

Basic goods output grew 7.6 per cent in July, against a growth of 1 per cent a year ago. For April-July, the segment has grown by 8.1 per cent compared to 0.1 per cent in the same period of 2013-14.

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