Factory output stages recovery in FY15

The factory output, as measured by index of industrial production, increased by 2.8 per cent during FY15, marking a partial recovery from slowdown that had set in during post-FY11 period. Industry growth fell from a robust 8.6 per cent in FY11 to 2.9 per cent in FY12, which was followed by stagnation in the subsequent year and a decline during FY14. Intra-year, the improvement of Q3, from decline in growth rate in Q2, was carried to Q4 (notwithstanding a five-month low 2.1 per cent increase in March), even as the Q4 feat did not match 4.5 per cent rise in Q1 that had come on the back of a double-digit increase in power generation.

Mining index increased 1.4 per cent during FY, after declines in the preceding three years. Coal production was up 8.2 per cent, the best rate over the past six-year period. Crude oil and natural gas production remained in the negative zone for the third year. Barring a subdued feat in April and January, coal production remained strong over the fiscal.

Manufacturing index, spread over 22 major industries (at two-digit level), rose 2.3 per cent during the year, recovering from 0.8 per cent decline in FY14 and 1.3 per cent rise two years ago. Intra-year, Q2 recorded stagnation, which was followed by a recovery in next two quarters. Among the industries, basic metals index increased 12.7 per cent, the highest rate after 18 per cent in 2007-08; however, alloy and non-alloy steel production stagnated at year-ago level. Electrical machinery production gushed 21 per cent, against 14 per cent in FY14 and stagnation two years back. Electrical machinery includes transformers, electric motors, circuit breakers, electrical cables, storage batteries etc. Non-metallic mineral products increased 2.6 per cent (1.1 per cent), though cement production was up 5.6 per cent (3.1 per cent).

Machinery and equipment index increased 3.6 per cent, which came after declines in the previous three years. Machinery and equipment includes agricultural and industrial machinery, earthmoving equipment, machine tools as also refrigerators, washing machines, solar power systems etc. Commercial vehicle production increased 6.4 per cent (5.9 per cent) and motor vehicles 2.4 per cent (decline of 9.6 per cent). Furniture, gems and jewellery etc. increased 7.4 per cent, after declines in earlier four years. Among the other industries, textiles showed 2.7 per cent increase (4.4 per cent) and wearing apparel 5.4 per cent (19.5 per cent), reflecting declining exports; coke and petroleum products increased 0.7 per cent (5.2 per cent), and chemicals and chemical production index showed nominal decline, as also fabricated metal products, radio and TV, and medical equipment.

Power generation increased 8.4 per cent, the highest rate over the decade. The fear was made possible due to 10.8 per cent strong rise in thermal power, particularly coal-lignite based segment.

Capital goods
An indication that project execution is slowly coming to its feet, capital goods production increased 6.2 per cent, which came after declines in the earlier three years. Importantly, though, a little jerky due to lumpiness in production, capital goods index has remained in the positive growth zone since October 2014. The segment includes a wide range of industrial, electrical machinery, electrical cables, commercial vehicles etc. Among the other inputs in project investment, cement production rose 5.6 per cent, but alloy and non-alloy steel production stagnated at year-ago level.

Consumer durables index that covers passenger cars, white goods and also gems and jewellery has been declining since December 2012, barring sporadic increases, like that in Mayl last year. Among the other categories, basic goods, intermediate goods and consumer non-durables increased by 6.9 per cent, 1.6 per cent and 2.8 per cent, respectively.

We cannot delve further into analysis for want of more details, which were made public earlier. All the same, we may point out that reinvigorating a weak industry that has gone under due to multiple problems like poor project execution pace, unsupportive export markets, competitive imports, inefficient physical infrastructure etc. holds the key to success of ‘Make in India’ thrust of the Modi government.