Despite sluggish retail credit offtake, increased consumer spending over the festival season propelled growth of the consumer goods sector to 12.5% in October 2007, against the rather dismal 2.8% fall in the same period last year.
Buoyant consumer spending lifted the index of industrial production by 11.8% in October 2007, the highest in the last seven months, according to the government?s latest data. Last year, industrial production grew 4.5% in the same period, while in September 2007 it was 6.4%.
Finance minister P Chidambaram on Wednesday described the outlook for industrial production as encouraging. ?However, the April-October figure is still slightly lower than last year?s figures for the same period,? Chidambaram cautioned. Cumulative industrial growth in April-October was marginally down to 9.7% from 10.1% in the corresponding period last year.
The consumer durables sector grew 9.3% in October. However, in April-September, the sector showed a decline of 1.3%, compared to a healthy 12.7% growth in the corresponding period last year.
A series of interest rate hikes over the past one year has slowed demand for automobiles, real estate and some consumer durables, which picked up in October on the back of a run of festivals.
In addition, Indians received the second-highest salary increase in the Asia- Pacific region this year, helped by unprecedented economic growth. Wages rose an average of 14.8% in 2007 from 14.4% last year, according to human resources consulting firm Hewitt Associates Inc.
Bankers said demand for retail credit would continue to remain sluggish as interest rates were unlikely to ease, even after the US Federal Reserve cut its key rate by 25 basis points on Tuesday.
?With the busy season already on, credit demand is expected to pick up in agriculture and industry. But retail credit, which has slowed, is likely to remain sluggish,? confirmed LP Aggarwal, GM (credit) at Punjab National Bank. Analysts also expect some moderation in industrial production figures in coming months.