Even as consumer confidence continued to wane, the power and mining sectors helped factory output post a modest recovery in September.
Industrial production recorded a growth of 2 per cent in September against a contraction of 0.7 per cent in the same month last year. Industrial production in August was up 0.4 per cent.
Expectations had been raised by the strong core sector numbers of September, which had indicated some green shoots. But this hope was belied by the capital goods (heavy machinery) sector remaining in contraction mode, indicating that companies are not investing in new projects or expanding existing facilities.
The IIP growth came mainly from the power and mining sectors, while manufacturing was only marginally better.
The consumer durables segment contracted 10.8 per cent in September against contraction of 1.5 per cent last September. For the six months (April-September), this segment declined 10.9 per cent against a growth of 4 per cent during the corresponding previous period.
Consumer non-durables, such as soaps and detergent powders, grew over 11 per cent in September against a growth of 1.4 per cent in September 2012.
According to experts, with high inflation reducing disposable income, spending on consumer durables was restricted.
Industry chambers are, however, disappointed at the latest output numbers. The Confederation of Indian Industry (CII) felt that the modest increase in IIP in September is not reason enough to conclude that industry has turned the corner and is on a recovery path. Assocham said that the number mirrored the prolonged subdued industrial activity in the country.
“A disaggregated analysis shows that while growth in the capital goods sector is still fragile, there are indications of an upturn in the production of intermediate goods. However, the performance of consumer goods — particularly that of consumer durables — continues to be a cause for concern as it indicates very poor demand,” said Chandrajit Banerjee, Director-General of CII. He, however, hoped that the data for October and November will see some buoyancy owing to demand pick-up during the festival season.
Naina Lal Kidwai, President of FICCI, said, “The positive growth in manufacturing shows some revival in activity. However, we expect the growth in manufacturing to be subdued in the coming months also as a result of the current slowdown in domestic demand and a lack of investor optimism given the usual uncertainty that builds around elections.”
“Looking at the consistent negative growth in consumer durables, the Government needs to consider reviving demand to stimulate investments, including reduction of interest rates both for consumers and corporates ” she said.
The equity market also found the latest data below their expectations. “IIP growth for September at a modest 2 per cent has come in below market expectations largely owing to negative surprise from the manufacturing sector,” Bhupali Gursale, Economist with Angel Broking, said.