India’s factory output for the month of August 11 grew slower-than-expected. It registered a growth of 4.1 against forecast of 4.7 percent and 4.5 percent in August 2011. This was only marginally better than the output growth in July at 3.8 per cent. Commenting on the Index of industrial production data for August which was released today, Harsh Mariwala, President, FICCI and Chairman Marico Group said “The slowdown in manufacturing sector is more broadbased now as fourteen out of twenty two sectors have shown less than average growth for the period April-August 2011. On moving average basis also the growth of manufacturing sector has been falling in the last few months. In August 2011, the moving average growth of manufacturing sector was 5.6% as compared to 8.6% in March 2011”
The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August 2011 stand at 117.6, 172.6 and 149.4 respectively, with the corresponding growth rates of (-)3.4%, 4.5% and 9.5% as compared to August 2010. The cumulative growth in the three sectors during April-August, 2011-12 over the corresponding period of 2010-11 has been 0.2%, 6.0% and 9.5% respectively, which moved the overall growth in the General Index to 5.6%.
“There are enough signals of slowdown in the industrial sector now and it is high time that Government seriously looks into providing some investment boosting measures to revive the growth in manufacturing”, Mariwala said.
In terms of industries, eleven out of the twenty two industry groups in the manufacturing sector have shown positive growth during the month of August 2011 as compared to the corresponding month of the previous year with the industry group ‘paper and paper product’ showing no change in the index value. “While the negative of growth of mining sector has affected the growth of IIP, but FICCI analysis shows that even without mining, the growth of IIP would have been at 4.5% in August 2011 indicating moderation in growth of manufacturing sector”, said Mariwala.
The industry group ‘Radio, TV and communication equipment & apparatus’ has shown the highest growth of 12.5%, followed by 12.1% in ‘Other transport equipment’ and 11.6% in ‘Fabricated metal products, except machinery & equipment’. On the other hand, the industry group ‘Office, accounting & computing machinery’ has shown a negative growth of 26.8% followed by 20.5% in ‘Tobacco products’. Some of the important items of intermediate goods showing highly negative growth during the current month and thus contributing to the low growth of the overall index for the month include ‘Colour TV Picture Tubes’ [(-) 59.8%], ‘Viscose staple fibre’ [(-) 40.9%], ‘Sealed Compressors’ [(-) 38.7%] and ‘twine, jute (sutli)’ [(-) 36.0%]. However, some important items of the intermediate goods are also showing significant positive growth. These are: ‘Petroleum Coke’ (287.4%), ‘Furnace Oil’ (38.9%) and ‘Industrial Alcohol (Rectified/Denatured Spirit)’ (36.6%).
“The growth in consumer goods sector, especially the consumer durables, is much below the expectations as normally during these months we expect some inventory build-up due to festivals. Since the growth in consumer durables sector in April-August 2011 is one-fourth of the growth in same period last year, it calls for reversal of some of the monetary tightening measures to stimulate domestic demand”, said Mariwala.
The growth rates in August 2011 over August 2010 are 5.4% in Basic goods, 3.9% in Capital goods and 1.3% in Intermediate goods (Statement III). The Consumer durables and Consumer non-durables have recorded growth of 4.6% and 2.9% respectively, with the overall growth in Consumer goods being 3.7%.
“Investment demand has also been affected in the last few months as is indicated in the negative growth of machinery which was -1.8% in April-August 2011. We expect the growth in industrial sector and investments to be low in coming months also as the impact of rising cost of credit would continue” said Mariwala.