The Index of Industrial Production (IIP) on Friday registered a 6.3 per cent growth in April, according to the new series with base year 2004-05 released by the Central Statistics Office (CSO) as against 13.1 per cent recorded in the same month in the previous year.
Union Finance Minister Pranab Mukherjee termed the declining industrial growth rate in April as disturbing stating he would wait for more data to ascertain the trend.
As per the new series, manufacturing growth in April stood at 6.9 per cent against 14.4 per cent in April, 2010, while mining and electricity production was up by 2.2 per cent (9.2 per cent) and 6.4 per cent (6.5 per cent), respectively. Capital goods registered a growth of 14.5 per cent (35.5 per cent) and consumer goods were up by 2.9 per cent (13.8 per cent).
On the other hand, as per the old series (base year 1993-94), the industrial output registered a steep fall at 4.4 per cent in April against 16.6 per cent a year ago. Growth in manufacturing, which constitutes about 80 per cent of the index weight, nosedived to 4.4 per cent in April from a high of 18 per cent in the same month in the previous year.
Major area of concern
Mining also grew by a meagre 2.1 per cent during the month under review as against 12 per cent in April, 2010. Growth in electricity production also dipped to 6.4 per cent from 6.9 per cent. A major area of concern was the low off-take of capital goods, whose production growth was just 2.5 per cent in April compared to 64.1 per cent in same month in the previous year. Overall, consumer goods also saw a slow growth rate of 5.9 per cent (11.9 per cent).
Production trends for 100 new items, including ice cream, fruit juice and mobile phones, has been included for measuring the pace of industrial production in the new index series. The new items in the IIP would include computer stationery, newspapers, chemicals such as ammonia and ammonia sulphate, electrical products such as solder power systems, gems and jewellery and molasses.
On the other hand, obsolete articles such as typewriters, loud speakers and VCRs have been taken off to make the series representative of the present-day industrial production and demand scenario.
The base year for the new series is 2004-05 as against 1993-94 for the old one. The new IIP series is expected to help policymakers and market participants forecast economic trends. The Department of Industrial Promotion and Policy (DIPP) and the CSO jointly worked on the new index.
The latest slide in monthly numbers came after the IIP registered a growth of only 7.8 per cent in March, revised upward from the original estimate of 7.3 per cent, as against 15.5 per cent in March, 2010. Experts had blamed the RBI's rate hikes, leading to lowering of investments and a fall in output, for the slowdown in IIP growth. Some experts said the slowdown might force the RBI to have a relook at its monetary tightening policy. However, many others said the prevailing high inflation situation would force the RBI to continue with the rate hikes. Crisil chief economist D. K. Joshi said: “IIP growth is quite volatile and not to read much from monthly trends. The most important development after the introduction of the new index is the confirmation of belief that the previous index under-stated industrial growth.'' Mr. Joshi said the RBI was likely to hike rates by another 25 basis points at its next review on June 16.
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