Industrial output shrinks; but some bright spots seen

India's industrial production registered a negative growth rate for the second time in a row, as a sharp drop in demand (both overseas as well as domestic) prompted more cutbacks from factories, mines and utilities, according to Government data. The Index of Industrial Production (IIP) stood at 280.4 in January compared to 281.9 in the same month last year, representing a shrinkage of 0.5% from a year earlier, the Central Statistical Organization (CSO) said. Economists' estimates ranged between 1% contraction to 1% growth. Industrial production grew by 6.2% in January 2008. December's output was revised to a contraction of 0.6% as against the preliminary forecast of a 2% decline. Last month, the Government had revised November's provisional industrial output figure from a growth of 2.4% to an expansion of 1.7%. October's IIP reading was revised for a second time to a growth of 0.1% versus a revised contraction of 0.3% (- 0.4% provisional).

Manufacturing growth in January stood at (-) 0.8% compared to (-) 1% in December and a healthy 6.7% in January 2008. Growth in mining sub-segment shrank by 0.4% in January this year versus a growth of 1.8% in December and 2.9% in the year-ago period. Electricity output rose by 1.8% in January as against 1.6% in December and 3.7% in January last year. During April-January 2008-09, the industrial output grew by 3% versus 8.7% in the year-ago period.

As many as five 5 out of the 17 industry groups showed a positive growth during January 2009 compared to the corresponding month of the previous year. The industry group ‘Machinery & Equipment’ showed the highest growth of 17.5%, followed by 10.3% in ‘Other Manufacturing Industries’ and 5.3% in ‘Beverages, Tobacco and Related Products’. On the other hand, the industry group ‘Food Products’ showed a negative growth of 16.1% followed by 15.2% in ‘Wood & Wood Products' and 13.4% in ‘Transport Equipment and Parts.’

In what could be a pointer to continued investments, Capital Goods grew by 15.4% in January as against 5.2% in December and 2.6% in the year-ago period. Intermediate Goods contracted by 9.2% after shrinking 9.4% in December and growing by 8% in January 2008. Basic Goods registered a de-growth of 1% compared to a growth of 1.9% in December and 3.6% expansion in January 2008.

Spending by individuals too seem to have recovered somewhat following the series of stimulus plans and rate cuts over the past six months. Consumer Durables grew by 2.5% after contracting 4.1% in December and shrinking by 0.5% in January 2008. Consumer Non-durables rose by 0.7% versus 3% in December and 11.1% growth in the same month last year. Overall, Consumer Goods grew by 1.1% as against a growth of 1.5% in December and an 8.4% expansion in the year-ago period.