The Hindu Business Line : Industrial growth falls to 5.3% in Nov ’07

New Delhi, Jan 11 After notching a growth of 11.8 per cent in October 2007, industrial growth plummeted to 5.3 per cent in November that year. The fall is also significant when compared to the 15.8 per cent growth registered in November 2006 as it translates to a 66.45 per cent decline in growth rate year-on-year.

The fall in the growth rate in November 2007 has been across-the-board, with manufacturing growing only at the rate of 5.4 per cent in that month against 17.2 per cent in the same month of the preceding year. Mining was down to a 3.5 per cent growth against 8.8 per cent in November 2006 while electricity generation grew only 5.8 per cent against 8.7 per cent.

However, alarm bells are not yet ringing since the higher growth in the earlier months of 2007-08 fiscal have helped register a cumulative growth (April-November) of 9.2 per cent in the Index of Industrial Production (IIP) which is a shade down from the cumulative IIP of 10.9 per cent in April-November 2006.

Still, the slip in IIP has led the Assocham President, Mr Venugopal Dhoot, to comment that the reason for the poor performance was the fact that the Government was not giving attention to the manufacturing sector as much as it was giving to infrastructure. He also added that the fall should not be seen with too much anxiety as IIP varies from month to month.

According to the economist, Dr Bibek Debroy, “this fall is because of the old reasons of rupee appreciation and interest rate hikes. But it is not a long term trend. I expect interest rates to soften in the next few months. But rupee appreciation, which started around eight to nine months ago, would be a long term phenomenon.”

Sectoral data released by the Central Statistical Organisation on Friday shows that capital goods and intermediate goods recorded growth rates of 24.5 per cent and 7.3 per cent in November 2007 as against 29.4 per cent and 17.9 per cent, respectively, in November 2006.

The slowdown in the consumer goods category also continues, with growth in consumer durables slipping from 10.1 per cent to negative 4.1 per cent and for consumer non-durables the respective figures stood at 14.8 and negative 2.1.

However, some sectors revealed marginal changes during the eight-month period. Power generation during April-November 2007 declined to 7 per cent from 7.3 per cent a year ago, while mining sector grew by 4.9 per cent against 4.2 per cent during the comparable periods.

Also, the growth rate in capital goods sector increased to 20.8 per cent in April-November this year as against 17.4 per cent during the corresponding period last year.

According to Mr P.K. Choudhury, Managing Director of the credit rating agency ICRA, the drop in demand for consumer durables could be a major trigger for the fall in the growth rate of industrial production, apart from macro economic reasons such as rupee appreciation and interest rates.

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