Indian Industrial output rises by 6.8 percent

(posted under - Industrial output, Economy of india) - Industrial output as measured by the index of industrial production (IIP) clocked an annual growth rate of 6.8% in July, making it the second consecutive month of buoyant industrial growth after a weak show that started last October, data released by the Central Statistical Organisation on Friday showed. The provisional IIP figure of 7.8% for June was revised upwards to 8.2%.

Analysts pointed out that a key reason behind the robust performance by the mining sector is Reliance’s KG basin facilities coming on stream during the first quarter of the current financial year. Within the manufacturing segment, the 8.8% growth in consumer goods, the highest in eight month, suggested that the domestic consumption story remains strong in India.

Industrial output down 0.5 percent yoy

India's industrial output likely shrunk in March from a year earlier, its third fall in four months, as the global economic slowdown hit exports and domestic demand remained soft, a poll showed.

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The median forecast in the poll of 13 analysts was for an annual decline of 0.5 in the index of industrial production (IIP) in March, the final month of the 2008/09 fiscal year.

Output fell an annual 1.2 per cent in February, according to provisional figures. Output rose 0.4 per cent in January and fell 0.6 per cent in December.

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"It's going to be flattish, near the trough. Exports remain weak and domestic demand is also subdued," said D.K. Joshi, principal economist at rating agency Crisil.

Some economists expect industrial output grew less than 4 per cent in India's fiscal year that just ended in March, less than half the 8.1 per cent growth rate of the previous year.

Economists expect output growth to improve in coming months as government stimulus measures and aggressive rates cuts by the central bank take hold, with demand for consumer goods, vehicles and building materials showing signs of picking up.

Macquarie Securities said industrial growth may reverse its weaker trend from April as motor vehicles, cement and steel are already showing signs of increased activity.

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A survey of purchasing managers showed expansion of manufacturing activities in April, its first uptick in five months.

Car sales, a gauge of consumer demand, rose 4.2 per cent in April from a year earlier, but sales of trucks and buses were down 11.3 per cent.

India's factory output sharply slowed last year as high borrowing costs and the global credit crunch forced firms to delay expansion plans and then cut output as demand for goods in overseas markets fell sharply.

Policymakers say the economy may have grown less than 7 per cent in 2008/09, slowing sharply from 9 per cent or more seen in previous three years. The central bank expects the growth rate to slow further to 6 per cent in 2009/10, which would be the weakest in seven years.

India ranks second in industrial production among developing countries

India ranks among the top five developing countries in production of six major industrial items, including textiles, motor vehicles, chemicals and basic metals, according to a UN agency UNIDO.

In four out of the six industrial products - textiles, chemicals and chemical products, basic metals and electrical machinery and apparatus - India figures at number two only behind China.

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India's annual growth rate of manufacturing value added (MVA) has risen from 6.9 per cent in the period 2000-2005 to 12.3 per cent between 2005 and 2007, according to the year book of the United Nations Industrial Development Organisation (UNIDO).

It found that the share of MVA in India's gross domestic product (GDP) has risen to 14.8 per cent in 2006 from 13.8 per cent in 2001.

UNIDO found that the developing countries now produced almost 30 per cent of the world MVA compared to 16 per cent in 1990.

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"The increasing share of developing world vis-a-vis industrialised countries is also explained by the shift of location of manufacturing, especially assembling of final products from industrialised countries to developing countries," the UNIDO said.

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