IIP rises by 4.4% in July; rise in capital goods hint at higher investment by companies
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New Delhi: India’s industrial output growth slowed to 4.2 per cent in July compared with an upwardly revised 4.4 per cent growth a month ago. However, industrial growth is higher than July 2014 when industrial production had expanded by a mere 0.9 per cent.
In terms of industries, 12 out of 22 groups in the manufacturing sector showed positive growth in July. The manufacturing sector, which constitutes over 75 per cent of the IIP, grew by 4.7 per cent in July against a contraction of 0.3 per cent in the same month last year. The output of capital goods sector, which represents capital investment, grew at an impressive rate of 10.6 per cent against a contraction of three per cent in the same month last FY. The mining sector growth was at 1.3 per cent in July against 0.1 per cent in last fiscal.
“It is encouraging to see the positive growth in manufacturing over the last few months and we hope that this growth and demand will pick up as we are nearing the festive season. There is a potential to take this growth to a higher level with the help of more supportive policies for stimulating domestic demand and exports,” said Dr Jyotsana Suri, president, Ficci.
Power generation growth slowed to 3.5 per cent in July compared to 11.4 per cent in the same month a year ago. The consumer durables goods output expanded at 11.4 per cent in July compared to a contraction of 20.4 per cent in the month a year ago. However, consumer non-durable contracted by 4.6 per cent in July. Overall consumer goods output rose by 1.3 per cent in July compared to a contraction of 5.9 per cent in the month a year ago.
Economy recovers without credit spurt:
India’s current economic growth though slower than expected comes without credit growth — a phenomenon that was once considered rare. Observing this in its report, A phenomenon not so rare: The anatomy of India’s low credit recovery?, IMF said this is broadly in line with the characteristics of ‘low credit’ growth recoveries displayed globally. The model, however, is quite opposite to the credit-led growth being witnessed in the United States.
An IMF paper analysing 223 recovery episodes from around the world points out: “One out of five recoveries are in fact credit-less. However, they have some special characteristics. Output growth during such recoveries is about a third (33.33 per cent) lower than in normal ones. For India, output growth has so far been a quarter lower than in a previous ‘normal’ recovery episode and the financially dependent investment sector has a disproportionately lower contribution to growth.”
( Source : deccan chronicle )
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