Factory output surges by 17.6% in April to near 20-year high

New Delhi, June 11 (PTI) After last fiscal's double-digit
expansion, industrial production picked up more steam to grow
by 17.6 per cent in April, boosting the prospects of achieving
8.5 per cent economic growth in 2010-11.

The increase in output was due to a robust showing by the
manufacturing sector and a low-base effect, caused by the
global economic slowdown.
Manufacturing, which accounts for around 80 per cent of
the Index of Industrial Production (IIP), expanded by 19.4 per
cent in April, with capital goods growing by 72.8 per cent and
consumer durables by 37 per cent.
The April figure is almost equal to the 20-year-high
output of 17.7 per cent achieved in December 2009.
Analysts say that the strong uptick in April, coupled
with a normal monsoon, would help the economy grow by an
estimated 8.5 per cent in 2010-11.
However, India's Finance Minister Pranab Mukherjee said
he expected the industry to do even better in April.
"Of course, my appetite is infinite. I would have been
happier if it was 20 per cent," he told reporters.
While the double-digit growth has strengthened the case
for stimulus rollback, Planning Commission Deputy Chairman
Montek Singh Ahluwalia cautioned that withdrawal should not be
quickened.
"I don't think it (stimulus withdrawal) needs to be
quickened," he said.
India Inc also cautioned that the trend may moderate from
June onwards since part of the industrial expansion could be
attributed to a low base in April last year.
"This trend of very high growth might moderate from June
onwards because of the base effect," Ficci Secretary General
Amit Mitra said.
In fact, the low base is quite evident as capital goods
had contracted by 5.9 per cent in April 2009, even as consumer
durables had risen by 17.6 per cent.
Crisil chief economist D K Joshi said a one-off rise in
IIP numbers would not prompt the RBI to further tighten money
supply, especially when the fear of contagion of debt crisis
in eurozone is growing.
"One piece of figure will not prompt the RBI to change
its stance. We expect them to go on with their moderate
monetary stance. While inflation is a concern, the eurozone
crisis is an active hedge," Joshi said.
Production of consumer non-durables grew by 6.6 per cent,
a 10.5 per cent fall from April 2009.
"In April figures, one missing piece of puzzle is why
consumer non-durables are so weak," Joshi said.
Besides manufacturing, mining expanded by 11.4 per cent
in April against 3.4 per cent a year ago.
On broad sectoral story, electricity was a weak link as
generation rose by six per cent in April, lower than 6.7 per
cent a year ago.
Following strong IIP numbers, the Bombay Stock Exchange
benchmark shot up 143 points to close at 17,064.95 point.
Of the 17 industries, only two--beverages, tobacco and
related products and wood and wood products--posted negative
growth in April.
The processed food sector, which has been on a decline
for quite some time, rose by 22.9 per cent in the month. The
rise could fuel prices of food items like flour even further.
Output of machinery and equipment other than transport
expanded by 55.6 per cent, while metal products and parts grew
by 51.9 per cent.
April growth was in line with upbeat industrial growth
of the previous seven months, when output expanded by double
digits.
After the collapse of the US financial services icon
Lehman Brothers in September, 2008, global financial crisis
deepened and industrial production in India contracted for the
first time in 16 years in October that year.
As industrial growth slipped into the negative zone, the
Government rolled out stimulus packages in stages by cutting
excise duty by six per cent and service tax by two per cent,
besides stepping up public expenditure to prop up growth.
However, with the economy picking up pace, the government
has started unwinding some of its emergency measures. It
partially raised the excise duty on non-petroleum products by
two per cent to 10 per cent in the Budget this fiscal. PTI KKS
MRD