IIP up 10.3% on low base; durables shine
The Financial Express, December 12, 2009, Page 1
fe Bureaus, New Delhi
India’s industrial output grew at a healthy 10.3% in October, despite fewer working days and export contraction during the month. Economists maintained that though the increase was not up to expectations, it was a sign of the continued uptick in the economy.
The increase in industrial output has been attributed to weak growth in the same month a year ago and increased production of consumer goods like vehicles. October’s factory output growth is a tad better than the revised 9.63% recorded in September, and a significant recovery from October 2008, when the index of industrial production (IIP) grew a mere 0.1%.
“There is no need to be euphoric about the numbers, as they are mostly on account of the base effect. But after discounting that, we see some improvement in factory output, especially in the consumer durables segment,” said Crisil economist DK Joshi.
The IIP data failed to bring cheer to equity markets, as both the Sensex and Nifty ended lower. Though the 30-share BSE Sensex closed only 39 points down at 17,150 points, this was 200 points below the intra-day high. The 50-share Nifty shed 12.55 points by the end of trading. The slide in both indices started at around noon after the IIP figures were released.
Industry and government were, however, more upbeat. “The growth rate well above 10% is not just a base effect. There is an element of growth that is taking place, which I hope will be sustained,” said Planning Commission deputy chairman Montek Singh Ahluwalia.
Ficci chairman Harsh Pati Singhania attributed the strong rise in IIP to the low interest regime and called for its continuation. “The IIP figures clearly establish that the Indian economy has recovered and can achieve a high growth trajectory provided the present policy parameters are not changed. They show all-round improvement,” Singhania added.
India’s industrial production has been on an upswing since April after the government and RBI offered fiscal and monetary relief. Significantly, exports by the industrial sector have also increased since April, even though it is still in negative territory. In October, exports contracted 6.6%.
Output from the manufacturing sector, which accounts for nearly 80% of India’s industry, grew at a 28-month high of 11.12% in October. Mining output increased 8.16%, while electricity generation expanded 4.67%. Within manufacturing, consumer durables output expanded 21%, as factories produced more cars, two-wheelers and appliances. This, despite the festive season, when companies focus on moving existing stocks and factories remained idle on account of Diwali.
FMCG production showed traction with an 8% increase, the most in 11 months. Significantly, the sector includes many processed food items, which are dependent on the farm sector for inputs.
The robust 14.3% growth in intermediate goods output was also due to a lower base effect. Production of capital goods, which is an indicator of investment in factories, grew by a healthy 12.2%. In terms of industrial sectors, only jute and vegetable fibres posted a contraction in production. Double-digit growth was seen in wool, silk and man-made fibres, basic chemicals, plastics, petroleum & products and coal-based derivatives, as well as machinery & equipment.
“A host of indicators suggest continued improvement in economic activity. However, near-term data may remain weak due to the widespread effects of the drought,” said a report by Goldman Sachs economists Pranjul Bhandari and Tushar Poddar.
The Financial Express, December 12, 2009, Page 1
fe Bureaus, New Delhi
India’s industrial output grew at a healthy 10.3% in October, despite fewer working days and export contraction during the month. Economists maintained that though the increase was not up to expectations, it was a sign of the continued uptick in the economy.
The increase in industrial output has been attributed to weak growth in the same month a year ago and increased production of consumer goods like vehicles. October’s factory output growth is a tad better than the revised 9.63% recorded in September, and a significant recovery from October 2008, when the index of industrial production (IIP) grew a mere 0.1%.
“There is no need to be euphoric about the numbers, as they are mostly on account of the base effect. But after discounting that, we see some improvement in factory output, especially in the consumer durables segment,” said Crisil economist DK Joshi.
The IIP data failed to bring cheer to equity markets, as both the Sensex and Nifty ended lower. Though the 30-share BSE Sensex closed only 39 points down at 17,150 points, this was 200 points below the intra-day high. The 50-share Nifty shed 12.55 points by the end of trading. The slide in both indices started at around noon after the IIP figures were released.
Industry and government were, however, more upbeat. “The growth rate well above 10% is not just a base effect. There is an element of growth that is taking place, which I hope will be sustained,” said Planning Commission deputy chairman Montek Singh Ahluwalia.
Ficci chairman Harsh Pati Singhania attributed the strong rise in IIP to the low interest regime and called for its continuation. “The IIP figures clearly establish that the Indian economy has recovered and can achieve a high growth trajectory provided the present policy parameters are not changed. They show all-round improvement,” Singhania added.
India’s industrial production has been on an upswing since April after the government and RBI offered fiscal and monetary relief. Significantly, exports by the industrial sector have also increased since April, even though it is still in negative territory. In October, exports contracted 6.6%.
Output from the manufacturing sector, which accounts for nearly 80% of India’s industry, grew at a 28-month high of 11.12% in October. Mining output increased 8.16%, while electricity generation expanded 4.67%. Within manufacturing, consumer durables output expanded 21%, as factories produced more cars, two-wheelers and appliances. This, despite the festive season, when companies focus on moving existing stocks and factories remained idle on account of Diwali.
FMCG production showed traction with an 8% increase, the most in 11 months. Significantly, the sector includes many processed food items, which are dependent on the farm sector for inputs.
The robust 14.3% growth in intermediate goods output was also due to a lower base effect. Production of capital goods, which is an indicator of investment in factories, grew by a healthy 12.2%. In terms of industrial sectors, only jute and vegetable fibres posted a contraction in production. Double-digit growth was seen in wool, silk and man-made fibres, basic chemicals, plastics, petroleum & products and coal-based derivatives, as well as machinery & equipment.
“A host of indicators suggest continued improvement in economic activity. However, near-term data may remain weak due to the widespread effects of the drought,” said a report by Goldman Sachs economists Pranjul Bhandari and Tushar Poddar.
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