Friday, June 11, 2010
April IIP jumps 17.6% Capital Goods Soar
April industrial production grows 17.6% vs 13.5% (MoM)
THE COUNTRY’S industrial output rose for the seventh consecutive month in April at a much faster than expected rate of 17.6% from 13.5% a month earlier led by growth across all sectors. CNBC-TV18 had expected IIP to come in at 14%.
The manufacturing sector in April grew 19.4% as against 0.4%, while consumer durables surged to 37% versus 17.6%. The mining sector’s growth came in at 11.4% in the month versus 3.4%. There was strong growth in capital goods sector, which rose 72.8% from negative 5.9% on year-on-year basis and the consolidated non-durable jumped 6.6% as against negative 10.5%.
Finance Minister Pranab Mukherjee said that industrial growth was encouraging. However, economists said the data is unlikely to prompt any immediate policy action from the Reserve Bank as worries over Europe's debt crisis and the health of the global economic recovery are likely to prevent any policy tightening before the next scheduled quarterly review on July 27.
"From June onwards due to the strong base effect there is going to be some normalisation of growth rates," said Rupa Rege Nitsure, Chief Economist at Bank of Baroda.
Commenting on robust capital goods numbers, Jehangir Aziz Chief Economist at JPMorgan said, “If you would look at the numbers of last time on a seasonal adjustment basis, capital goods activity actually fell. So this (72.8% growth) is a good sign of the start of an investment cycle. This turnaround is earnest and I see momentum continuing in the month of May.”
Robust consumer demand
However the consumer durable numbers, according to Venugopal Dhoot Chairman and
Managing Director of Videocon, were not very surprising. “Since November the growth has been over 30%. In January it was 46% and now it is 37%. The consumer durable industry has taken good shape and credit goes to the stimulus package announced by the government in January 2009. Besides, the demand is good, interest rates are lucrative and the government has spent well on the below poverty line (BPL) bracket and people at the bottom of pyramid. We are seeing the impact last years budget where the government put money into the hands of the people. You will see that in July-August the growth in consumer durables will be similar to capital growth industry if there are good rains,” he reasoned.
Where are the figures headed?
On the outlook for FY11, Mridul Saggar, Chief Economist, Kotak Institutional Equities, said, “There is a possible upside considering that much growth in consumer durables has come from not much support from bank support to retailers. However, we need couple of more months to see if the actual investment activity has accelerated at grassroot level and to say if 10% growth will continue. But we are still skeptical about global scenario.”
"If investment growth picks up, then, for the year as a whole, IIP can be expected somewhere between 8.5-9% in FY11. This surely gives more elbow room to the Reserve Bank of India to pursue monetary tightening," Nitsure added.
(With inputs from Reuters)
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