Industrial production contracted 0.1% in the June quarter, according to the Index of Industrial Production (IIP). In the March quarter, industrial production growth was marginally positive.
This suggests that unless services growth does well, economic growth in the first quarter of fiscal 2013 may be slightly lower than the March quarter’s 5.3%.
There are other warning signs that suggest growth is decelerating.
IIP for June was lower than that for May. Manufacturing output in June, too, slipped below the May level. It was the 8.8% year-on-year (y-o-y) growth in the electricity sector that shored up industrial production in June; but, given that the lack of rains has badly affected hydroelectric power generation, the performance of the electricity sector is likely to be much worse in future.
The output of both basic and intermediate goods in June was below the May levels, although it was positive on a y-o-y basis.
The numbers for consumer goods make for dismal reading.
The sub-index for consumer goods in June came in at 185.4, lower not only than the May reading of 187.4, but also the April reading.
Consumer non-durables were the most affected, with the sub-index in June being 2.7% below the April level. The IIP numbers show that consumption demand is contracting and high inflation is, at last, taking its toll. With the monsoon failing, consumption is likely to take a bigger hit in future.
The growth in consumer non-durables was high on a y-o-y basis; but it’s noteworthy that the sub-index for this category, too, in June was lower than in May.
Rather surprisingly, growth in capital goods has been buoyant this fiscal, with its sub-index in June higher by 10.1% from its April level. To be sure, capital goods showed a huge 27.9% decline from the year-ago level, but that’s because of the effect of a jump in the index in June 2011. The June quarter results of capital goods companies have seen a modest pickup in order inflows from the power and infrastructure sectors—compared with the previous quarter—so, perhaps, we could see some improvement in this beaten-down segment.
While IIP data has its shortcomings, it does suggest that the economy has still not bottomed out.
Also See | Factory output data underlines investment drag (PDF)
PDF by Ahmed Raza Khan/Mint