News: Indian industry still rocking, on course for 9% growth

(DNA 13/04/2006) New Delhi - The industrial engine seems to be truly back in form, after giving some worrying moments in the last two months of calendar 2005. Industrial production grew a healthy 8.8% in February, 2006, against 5.9% in February, 2005.

Industrial production (measured by the index of industrial production) grew 8% in April-February, 2005-06. Though it’s a tad lower than the 8% growth in April-February, 2004-05, there doesn’t seem to be much cause for worry. “The growth momentum has been maintained. The suspicion of deceleration has been set aside,” says Pyaralal Raghavan, economist with Ficci.

He’s also confident that the 9% growth in industry expected in 2005-06, as given in the advance estimates of gross domestic product, would be achieved. The advance estimates are based on 1999-2000 prices, while the IIP is still based on 1993-94 prices.

There certainly seems to be recovery all around (see table). And it’s not just over last year. Month-wise performance has also been improving. That fact is most evident in the mining sector, where growth had been in the negative zone since July following the fire at the Bombay High North facility of the ONGC in June. Growth in the mining sector turned positive (0.2%) in January.

There’s been further improvement in February, with growth inching up to 0.9%, but that could also be because of the 1.6% decline in production in February, 2005.

Electricity production has also registered a sharp turnaround, not just over last year but also over January. That could be because the coal stock position has improved, with stocks almost double the level of what was available at the same period last year.

Another noteworthy feature of this month’s industrial production figures is the huge growth in the basic goods sector, which covers coal, petroleum, steel, and cement, among other things.

Part of it, though, is because of the base effect. But the basic metal and alloy industries, which is part of the basic goods sector, has also registered 13.9% growth. That industry has been clocking over 10% growth since September.

The consumer non-durables segment has effected a sharp turnaround, growing 10.6% in February after single-digit growth in December and January. Analysts’ explanation at that time - that this was because of closing of inventories - appear to have been right, after all.