Industry production grows 6.8% in July

The impact of the global slowdown on India is receding fast as industrial production has shown strong growth for the second month in a row. After growing 8.2% in June over the same month last year, the index for industrial production (IIP) went up by 6.8% in July. Industrial output increased by a lower rate of 6.4% in July 2008, when the global financial crisis was yet to surface. Figures for the first 4 months of 2009-10, due to slow growth of 1.1% in April and 2.2% in May, stood at 4.6% against 5.6% last year. The June production figure was revised from 7.8% earlier. At this point, it appears that the government’s stimulus measures are offsetting the impact of the drought, said Citigroup Global in a report, adding that the industrial growth figure for 2009-10 could be better than expected. The strong IIP numbers in June and July, coupled with low base effect from October (when India began feeling the heat of the recession) could take the growth figure on the higher curve later this year. In July, mining grew by 9.9% due to production of gas from KG basin as against 2.8% in the same period last year. Manufacturing, which constitutes around 80% in IIP, expanded by 6.8%, slightly lower than 6.9% a year ago. Mukherjee said the industrial output has started picking up and hoped the momentum would continue. Finance secretary Ashok Chawla also thinks the revival in the industry would continue. However, many economists do not share this view as credit offtake is not picking up and a slackening farm production would indirectly impact industry as well. At the same time slow growth in capital goods production also indicates weak revival. Pegging the industrial growth at 5.5% for 2009-10, Rohini Malkani of Citigroup said drought will take its toll on production. However, consultancy firm Goldman Sachs expects growth at 5.8%. Crisil principal economist D K Joshi said, “There is definitely an upward trend, but sustaining the trend would be a challenge. Credit offtake has yet not picked up.’’ Consumer durables, which includes TV, fridge and automobiles among others, expanded 19.8% in July despite a high base of 13.9% a year ago. In June the sector grew of 16.1%. Consumer nondurables, which remained sluggish for quite sometime, grew 5% against 3.4% a year ago. For the first four months, this sector registered a negative growth of 2.6%, due to dismal performance in earlier months. However, capital goods, which indicate investments, grew just 2% against 17.9% a year ago. This indicates that the recovery is still not very strong.

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