IIP cloud has silver lining
The Financial Express, April 10, 2009, Page 1
Economy Bureau, New Delhi
Industrial outpu-accounting for a fifth of GDP-contracted for the second time in three months to a record 15-year low growth of -1.2% in February. Within this, factory output fared worse, contracting by 1.4% in February, against 9.6% a year earlier.
But despite falling way below the robust 9.5% growth of February 2008, the trends show investment rates in the economy are picking up. The capital goods industry grew by a robust 10.4% in February, despite coming on top of a high base of 10.7% growth logged in February 2008. Month-on-month, too, the capital goods output growth rate is holding up. It was 15.1% in January 2009. This is a significant turnaround as capital goods production had slowed to 3.3% in the third quarter of 2008-09.
If the current trends continue into March, growth of the capital goods sector in the fourth quarter of 2008-09 would be the highest across the last five quarters. Reacting to the numbers, the stock markets held up, with the Bombay Stock Exchange 30-share Sensex closing on Thursday at 10,803.86—a 62-point rise. The rise was also partially due to a fall in inflation as measured by wholesale prices to 0.26%, thereby giving the Reserve Bank of India further room to ease monetary policy later this month.
The revival in the capital goods sector has been mainly on account of an increase in production of machinery and equipment, which has emerged the highest growing sector in the past two months. The sharp pick-up in demand for machinery and equipment suggests that capital investments, especially in power, have perked up after the stimulus packages provided by the government.
An Axis Bank report says these include power sector projects like the Rs 40-crore gas turbine compressor blade expansion project by Corrtech International, at Changodhar, ahead of schedule in January 2009. The project is currently operating at full capacity. Also JCB India completed its Rs 300-crore construction and earthmoving expansion project at Ballabhagarh in Haryana late last year.
Commenting on the results, economic affairs secretary Ashok Chawla told reporters, “If you look at the numbers, the impact continues to be on sectors where there is a very heavy export linkage, sectors like cotton textile, leather, mining, where the export of mines products is not taking off.” He said domestic demand continues to be robust particularly in the rural sectors.
The aggregate industrial output growth for April 2008-February 2009 has now fallen to just 2.8%, against 8.8% in the same period in the previous fiscal. The low growth rate means GDP for 2008-09 could finally close at around 6.2%. The worry line also includes the postponement of capital expenditure plans as credit off-take has slipped to 17.3% as on March 28, compared with a 21.6% plus rise in last fiscal, according to latest RBI data.
The revival in demand for investment goods seems to have been backed to some extent by the pick-up in the consumer durable goods sector that rose by 5.7% in the month.
However, output in the basic goods sector continues to contract for the second consecutive month, though the rate of decline has been contained at 0.4%.
And the 5.4% decline in the intermediate goods sector remains a cause for concern as the output in the segment has now contracted for the seventh consecutive month.
The Financial Express, April 10, 2009, Page 1
Economy Bureau, New Delhi
Industrial outpu-accounting for a fifth of GDP-contracted for the second time in three months to a record 15-year low growth of -1.2% in February. Within this, factory output fared worse, contracting by 1.4% in February, against 9.6% a year earlier.
But despite falling way below the robust 9.5% growth of February 2008, the trends show investment rates in the economy are picking up. The capital goods industry grew by a robust 10.4% in February, despite coming on top of a high base of 10.7% growth logged in February 2008. Month-on-month, too, the capital goods output growth rate is holding up. It was 15.1% in January 2009. This is a significant turnaround as capital goods production had slowed to 3.3% in the third quarter of 2008-09.
If the current trends continue into March, growth of the capital goods sector in the fourth quarter of 2008-09 would be the highest across the last five quarters. Reacting to the numbers, the stock markets held up, with the Bombay Stock Exchange 30-share Sensex closing on Thursday at 10,803.86—a 62-point rise. The rise was also partially due to a fall in inflation as measured by wholesale prices to 0.26%, thereby giving the Reserve Bank of India further room to ease monetary policy later this month.
The revival in the capital goods sector has been mainly on account of an increase in production of machinery and equipment, which has emerged the highest growing sector in the past two months. The sharp pick-up in demand for machinery and equipment suggests that capital investments, especially in power, have perked up after the stimulus packages provided by the government.
An Axis Bank report says these include power sector projects like the Rs 40-crore gas turbine compressor blade expansion project by Corrtech International, at Changodhar, ahead of schedule in January 2009. The project is currently operating at full capacity. Also JCB India completed its Rs 300-crore construction and earthmoving expansion project at Ballabhagarh in Haryana late last year.
Commenting on the results, economic affairs secretary Ashok Chawla told reporters, “If you look at the numbers, the impact continues to be on sectors where there is a very heavy export linkage, sectors like cotton textile, leather, mining, where the export of mines products is not taking off.” He said domestic demand continues to be robust particularly in the rural sectors.
The aggregate industrial output growth for April 2008-February 2009 has now fallen to just 2.8%, against 8.8% in the same period in the previous fiscal. The low growth rate means GDP for 2008-09 could finally close at around 6.2%. The worry line also includes the postponement of capital expenditure plans as credit off-take has slipped to 17.3% as on March 28, compared with a 21.6% plus rise in last fiscal, according to latest RBI data.
The revival in demand for investment goods seems to have been backed to some extent by the pick-up in the consumer durable goods sector that rose by 5.7% in the month.
However, output in the basic goods sector continues to contract for the second consecutive month, though the rate of decline has been contained at 0.4%.
And the 5.4% decline in the intermediate goods sector remains a cause for concern as the output in the segment has now contracted for the seventh consecutive month.
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