Dashing hopes of a recovery, industrial production index (IIP) declined 1.8 per cent in October, the first month of Q3, as compared to 1.7 per cent rise during July-September and 1 per cent decline during April-June. Even as the October feat was over 8.4 per cent increase in this month a year ago, which got a boost from its low year-ago base, with three months ending with y-o-y drops and the other four months a dismal average increase of around 1.5 per cent, the industry has proved a drag on the economy so far in the current fiscal. A highly underperforming industry in the face of spikes in WPI/CPI inflation rates has made the monetary management task very complex for RBI.

Heavyweight manufacturing declined 2 per cent in October and mining that provides fuel for power generation and feedstock and minerals to manufacturing industries a deeper 3.5 per cent. Power generation that had boosted industry in September with 13 per cent strong rise expanded only 1.3 per cent in October. Coal production declined 3.9 per cent, crude petroleum oil 0.8 per cent and natural gas 13.9 per cent.

Ten out of 22 major manufacturing industries recorded decline during the month. Some of the important products showing high negative growth during the month included earthmoving machinery [(-) 51.2 per cent], boilers [(-) 47.2 per cent], gems and jewellery [(-) 39.3 per cent], aluminium conductors [(-) 34.6 per cent], sugar machinery [(-) 32.7 per cent], generators and alternators [(-) 27.0 per cent], colour TV sets [(-) 25.2 per cent], telephone instruments (including mobile phones and accessories) [(-) 23.5 per cent], and commercial vehicles [(-) 22.6 per cent].

Products showing high positive growth were rubber insulated cables (143.1 per cent), air conditioners (room) (54.7 per cent), steel structures (28.8 per cent), transformers (small) (24.6 per cent), tractors (22.2 per cent), motorcycles (21.3 per cent), and scooters and mopeds (20.9 per cent). Among the use-based segments, basic goods and consumer durables posted decline and capital goods, consumer non-durables and intermediate goods only around 2 per cent increase.

INDEX OF INDUSTRIAL PRODUCTION (Y-O-Y % INCREASE)
 
October
April-October
 
2012
2013
2012-13
2013-14
Mining
-0.2
-3.5
-1
-2.7
Manufacturing
9.9
-2
1.1
-0.3
Electricity
5.5
1.3
4.7
5.3
Overall IIP
8.4
-1.8
1.2
0
Use-based classification
Basic goods
4.3
-1.6
2.9
0.7
Capital goods
7
2.3
-11.6
-0.2
Intermediate goods
9.6
1.8
2.3
2.5
Consumer goods
13.8
-5.1
4.2
-1.8
Consumer durables
16.7
-12
5.7
-11.2
Consumer non-durables
11.2
1.8
2.8
6.7

Taking the cumulative period of April-October, the aggregate IIP stagnated at year ago level; mining declined 2.7 per cent (decline of 1 per cent a year ago) and manufacturing 0.9 per cent (rise of 1.1 per cent) a year ago), though electricity was in positive zone with 5.3 per cent increase, speeding from 4.7 per cent rise in the corresponding period of 2012-13. Coal, crude petroleum oil and natural gas deteriorated annually. A weak industry in the context of strong power generation points to deeper problems hindering production.

A half of the 22 major manufacturing industries were in red zone, even as export-led wearing apparel index rose strongly by 35 per cent. Electrical machinery and apparatus also posted 28 per cent robust expansion. Radio and TV declined 22 per cent, furniture, fixture, gems and jewellery, office and accounting machines etc. 16 per cent, machinery and equipment etc. 9 per cent, and fabricated metal products and motor vehicles 7 per cent each. Cement production rose 4 per cent (8.8 per cent), alloy, non-alloy steel production 4.4 per cent (1.4 per cent) and petroleum products 3.7 per cent (29.7 per cent).

Among the use-based classification, capital goods index declined nominally and consumer durables, somewhat akin to investment goods, 11 per cent, Basic goods index stagnated at year ago level, intermediate goods index rose 2.5 per cent and consumer non-durables 6.7 per cent.

Given that IIP in November last year had declined due to its high year-ago base, factory output index for November 2013 should end with relatively a strong rise. According to tentative data from CEA, power generation has shown 5.9 per cent increase during the month, much better than 1.3 per cent in October. Going forward, even as it is difficult to hazard a guess due to an extremely shaky manufacturing, a subdued 1.5 per cent average rise during December-March 201-13 should help industry improve upon this pace during these corresponding four months in the current fiscal.


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