Jan factory output positive, but nobody calls it growth

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CG, consumer durables continue to contract

Jan factory output positive, but nobody calls it growth
Industrial output tur­ned positive in January after posting negative growth since October, but analysts feel the provisional numbers indicating marginal 0.1 per cent growth does not provide much comfort, with capital goods and consumer durables sectors continuing to contract.

The slight improvement in the IIP number was the result of higher electricity and mining output, the monthly factory output data showed on Wednesday. The IIP number for April-January remains flat against 1 per cent growth in the year-ago period.

The manufacturing sector, which constitutes over 75 per cent of the index, declined 0.7 per cent in January against 2.7 per cent growth achieved in the year-ago period. Manufacturing output contracted 0.4 per cent during April-January, compared with a 0.8 per cent growth in the first 10 months of the last financial year.

The industrial output data comes a week after HSBC’s manufacturing PMI for India surged to 52.50 in February from 51.40 in January. India’s manufacturing PMI averaged 52.13 from 2012 until 2014, reaching an all-time high of 55 in June 2012 and a record low of 48.50 in August 2013.

Icra’s senior economist Aditi Nayar said the improved performance of consumer non-durables in January was supported by high growth in items such as vitamins and cashew kernels, which are not indicators of any pickup in domestic consumption demand.

C Rangarajan, chairman of the prime minister’s economic advisory council, felt that the IIP numbers were on expected lines and there was a need for considerable pickup in manufacturing in February and March, the last two months of the financial year.

The government also revised the December industrial output to 0.16 per cent, a marginal growth compared with the negative 0.6 per cent shown in the provisional data released last month.

Sectoral performance showed that electricity generation grew 6.5 per cent in January, which was more or less similar to 6.4 per cent growth reported for the year-ago period.

The mining sector grew 0.7 per cent in January against 1.8 per cent negative growth in the same month in 2013.

CII director general Chandrajit Banerjee said the IIP data turning positive in January was small consolation, considering that the manufacturing sector continued to be in the red for the fourth consecutive month, which meant the slowdown was yet to show any sign of bottoming out.

“What is extremely worrisome is that the decline in investment and consumption demand is showing no sign of reversing, which could stem the downtrend and trigger an upturn in the investment cycle. The weak demand conditions, if allowed to persist, will make it difficult to even realise the growth predictions made in the advance estimates for the year,” he said.

The CSO advance estimates projected 4.9 per cent GDP growth for 2013-14 after clocking 4.6 per cent growth in the first half of the financial year. The third quarter GDP growth numbers released recently showed a mere 4.7 per cent growth, indicating that it may be difficult to achieve the growth projection for the whole year.

However, going forward, CII anticipates a pickup in industrial production as downside risks are receding gradually on account of the growth-inducing policy initiatives taken in the interim budget, Banerjee said.

Assocham said January IIP data showed industrial stagnation as the manufacturing industry continued to register deceleration. The growth figures for the capital goods and consumer durables sectors indicated that the industrial sector had lost growth appetite.

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