Oct industrial growth jumps to 11.8%
BS Reporter / New Delhi December 13, 2007
Experts cite festive buying, robust exports and low-base effect.
Festive buying, robust exports and low-base effect pushed up industrial output growth during October to a seven-month high of 11.8 per cent as against 4.5 per cent in the same month of the previous year.
This comes after industrial production dipped to a six-month low of 6.77 per cent during the previous month, mainly on account of high interest rates and a strong rupee.
“This was expected. Festive buying, coupled with a 35 per cent growth in exports in dollar terms and a lower industrial output in the same month of the previous year are responsible for the October numbers,” said Shubhada Rao, chief economist, Yes Bank.
According to Rao, the impact of the tightening monetary policy has not worn off and it will be difficult to sustain the October growth. “During 2007-08, industrial growth should be around 9.5 per cent.”
However, signs of moderation in industrial output were visible in the April-October period of this year as cumulative industrial production growth stood at 9.7 per cent, which was lower than the 10.1 per cent rise in the corresponding period of the previous year.
Finance Minister P Chidambaram said it was early to comment if the growth rates in October could be sustained in the coming months.
Analysts assured one should not be alarmed by the moderation in the industrial output in the April-October period. “Such moderation is normal under current circumstances. I expect the cumulative growth in industrial output to be around 9 per cent by the end of 2007-08,” said Samiran Chakrabarty, chief economist, ICICI Bank.
Industrial output during the month was fueled by a seven-month-high growth in the manufacturing sector (comprising 80 per cent of India’s industrial production), which stood at 13.3 per cent during the month as against 3.8 per cent in the year-ago period.
But in the April-October period, the cumulative growth was 10.4 per cent, marginally lower than the 11.1 per cent a year ago.
Festive buying pushed up sales of consumer durables to a seven-month high of 9.3 per cent as against 0.2 per cent a year ago. But in the April-October period, the sector recorded a dip of 1.3 per cent as against a 12.7 per cent growth in the corresponding period of the previous year.
The mining sector’s output in October slowed to 3.7 per cent as against 5.9 per cent a year ago. Electricity production also went down in October with a growth of 4.2 per cent as against 9.7 per cent in the same month of the previous year.
A slowdown was also seen in the basic goods sector, where output increased by 6.2 per cent as against 10.5 per cent during the month under consideration.
The sectors that have performed well during the month include capital goods, whose production increased by 20.5 per cent as against 6.5 per cent in the same month of the previous year.
Intermediate goods also saw a healthy growth rate of 14.2 per cent during the month as against 5.9 per cent in the same month of the previous year.
Story Comments
Total Post : 3
Posted By : anjalir on 13 December,2007
The numbers are encouraging!! But are they sustainable? Looking at the tight monetary policy, high interest rates and thereby suffering manufacturing sector, appreciating rupee which is discouraging exports and high base effect in IIP may play a spoil sport in coming months. India's blistering economic growth slowed to 8.9% in the second quarter to September 2007 hit by a downturn in manufacturing as higher interest rates and a strong rupee dragged on manufacturing and exports.
Posted By : anjalir on 13 December,2007
Though exports battled a rising rupee and an impending US slowdown to grow a healthy 35.65% in October 2007, the low base effect cannot be ignored. However, the October figures failed to cheer the economy fully, as exports from employment-intensive sectors like textiles, handicrafts and marine products had dipped significantly and exports would still fall way short of the target of $160 billion for the current financial year.
Posted By : anjalir on 13 December,2007
The rupee which has appreciated to 39.36 a dollar on 12 December 2007 over 39.56 a dollar on 3 December 2007 on back of capital inflows, will affect the exports growth.With the global commodity prices on up heal and poor expected wheat crop in rabi season domestically, coupled with recent rise in global crude oil prices could un bottle the inflation genie.
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