The new industrial growth numbers are a surprise—a pleasant one for those who believe in growth at all costs and an unpleasant one for those who fear the economy is overheating. Industrial output in April 2007 was a good 13.6% higher than it was a year ago.
The IIP spurt is puzzling at first glance. It is hard to understand how growth could have zoomed when bank credit is slowing down and interest rates are climbing. Production of consumer non-durables is up 21.9%, at a time when inflation in these goods has been high.
The mystery is solved when you look at the two-digit classification, which gives data on individual industries. Food products grew 55%, from a low base in April 2006. This group has a 9.08% weightage in the IIP, and its leap from last year’s low levels has done wonders for the top-line number. It alone added 5.5% to the total growth figure. Industry is doing well—but less than what the headline IIP numbers suggest.