The factory output, as measured by index of industrial production, declined in March, which with the earlier five months of y-o-y reduction pushed the average for FY14 into red zone. The weakening over the year, coming after a steep reduction in the growth rate from 8.2 per cent in 2010-11 to 2.9 per cent in 2011-12 and stagnation in the following year, reflects the fast erosion of manufacturing, the main thrust segment in industry. In fact, the decline in IIP during the fiscal was the first annual plunge in over three decades.

In another unnerving development, capital goods production index, surrogate for project investment, has declined for the third consecutive year, a dubious first that has not happened in over past two decades.

CAPITAL GOODS PRODUCTION INDEX
Year
% Increase
2005-06
18.1
2006-07
23.3
2007-08
48.5
2008-09
11.3
2009-10
1.0
2010-11
14.8
2011-12
-4.0
2012-13
-6.0
2013-14
-3.7

Intra-year, barring Q2, manufacturing was in the negative zone during the other three quarters. Though mining has ended the fiscal with a decline in outturn, the segment has recorded a steady progress from a steep decline of 4.7 per cent to a nominal decline in Q2, and a positive growth phase in the next
two quarters. Power generation, the base infrastructure to industry and in fact the economy, has remained in the relatively decent positive growth phase all through the four quarters.

The rot in manufacturing and to some extent in minerals supplying mining which together form nine-tenth of IIP, even when the power infrastructure had quickened the pace, is indicative of some major blocks to the country’s production facilities on demand side as also supply side involving policy issues.

The scenario is, no doubt, discouraging: a look at the performance of segments, for which details are given in IIP releases, gives clues to the problem segments, as also some segments which have defied the meltdown. Thus, in manufacturing, which accounts for three-fourth of IIP, motor vehicles (-9.6 per cent), radio and TV (-27 per cent), office, accounting and computing equipment (-16 per cent), fabricated metal products (-7 per cent), industrial machinery (other than electrical machinery) and medical instruments etc. (-5 per cent each), and gems and jewellery, furniture etc. (-14 per cent) were among the industries showing lower output during the year.

The 10 industries with negative growth over the year constituted 35 per cent of manufacturing. Of the 12 industries that were into positive growth, there were six industries which suffered slowdown in growth rates. Prominent in this category were textiles (4 per cent), petroleum refinery etc. (5 per cent)

INDEX OF INDUSTRIAL PRODUCTION (Y-O-Y % INCREASE)
Year
2009-10
2010-11
2011-12
2012-13
2013-14
Mining
7.9
5.2
-2.0
-2.3
-0.8
Manufacturing
4.8
8.9
3.0
1.3
-0.8
Electricity
6.1
5.5
8.2
4.0
6.1
Overall IIP
5.3
8.2
2.9
1.1
-0.1
Basic goods
4.7
6.0
5.5
2.5
2.0
Capital goods
1.0
14.8
-4.0
-6.0
-3.7
Intermediate goods
6.0
7.4
-0.6
1.6
3
Consumer goods
7.7
8.5
4.4
2.4
-2.6
Consumer durables
17.0
14.2
2.6
2.0
-12.2
Consumer non-durables
1.4
4.2
5.9
2.8
5.2

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