Underlying the overall fragility, manufacturing, which covers diverse industries, slipped back into negative zone in July, degenerating from 5 per cent increase in May and half this rate in June, just as infrastructures mining and electricity remained anchored in positive zone. Even the cumulative growth of 2.3 per cent in manufacturing over April-July, after a decline in the corresponding period of 2013-14, was pathetic. In mining, coal production expanded 5.7 per cent, though petroleum crude and natural gas remained in the negative zone. The 11 per cent robust increase in electricity was powered by a 14 per cent increase in thermal power generation.
Manufacturing has disappointed analysts who were hoping for further recovery in industry. Delving into 22 major industries in the sector, whose data is available in the CSO’s press release on IIP, we find that the rot is not across industries. Thus, 12 out of the 22 industries at two-digit NIC levels showed positive growth during July and 16 over April-July.
Six industries which showed negative growth during April-July included wearing apparel (-) 8.2 per cent; publishing and printing (-) 5.9 per cent; office and computing machinery (-) 38.8 per cent; radio, TV and communication equipment (-) 50.4 per cent; motor vehicles (-) 4.4 per cent; and coke and petroleum refinery (-) 1.6 per cent. These six eroding industries account for around a fifth of total manufacturing.
The decay in wearing apparel, apparently an export-oriented industry, has come after 10 per cent growth in 2012-13 and a sturdy 20 per cent in 2013-14. The production index of motor vehicles, trailers etc. has started looking up in June-July after average decline in the preceding two fiscals. Office, computing machinery, radio/TV and communication equipment are not vibrant industries.
Out of 16 industries with positive growth rates accounting for four-fifth of total manufacturing, there were 10 industries with a combined share of around 55 per cent in manufacturing, which recorded above-average growth rate (2.3 per cent) for the sector. This included food products, basic metals, non-metallic mineral products, transport vehicles and electrical machinery. In this, non-metallic mineral products and basic metals lacked strength in previous two fiscals and electrical machinery which grew 33 per cent over April-July despite 6.2 per cent decline in July has been growing robustly for quite a few months.
This leaves six industries which increased their production in the 0.1-2.3 per cent range during April-July. Prominent among these industries, which together accounted for a fourth of manufacturing, were chemicals and chemical products, paper and paper products, furniture, gems and jewellery, and fabricated metal products. Fabricated metal products declined in the preceding two fiscals. Furniture, and gems and jewellery, largely the later, declined in the previous four fiscals. The production of chemicals and chemical products had increased from 4 per cent to 9 per cent in the preceding two fiscals.
Capital goods decline
In use-based classification, capital goods index declined 3.8 per cent in July after increase in the previous three months, dashing hopes of some uptick in the sector that is a proxy indicator for project investment. Among the other inputs relevant for project execution, cement production was up 11 per cent during April-July, even as alloy and non-alloy steel production stagnated at year-ago level. What is also disheartening, consumer durables index plummeted 21 per cent after 23 per cent erosion in the preceding month and double-digit drop in the preceding fiscal. Consumer durables include passenger cars, two-wheelers, gems and jewellery etc.
Consumer non-durables stagnated at year-ago level. Basic goods and intermediate goods improved upon their year-ago feat.
INDEX OF INDUSTRIAL PRODUCTION (Y-O-Y % INCREASE)
268 DIPP industries
We believe IIP data released by only some broad categories lack their usefulness for policy purpose and would obviously lack credibility. In this connection, we may point out that the earlier practice of releasing data on the website of the Office of Economic Adviser, Department of Industrial Policy & Promotion on 268 DIPP industries, which together made up 45 per cent of broader IIP, enabled deeper analysis of IIP numbers. This also helped revalidate broader IIP numbers. The office of economic adviser, DIPP, discontinued release of IIP of 268 DIPP industries on its website from July-August 2012. We would strongly suggest resumption of the release of this data for improving transparency in broader IIP data.