The index of industrial production (IIP) numbers for September are not much of an aberration if one discounts the sharp spike in August. The IIP?s rate of growth that month was quite unusual at 10.4%. September?s 6.4% figure is roughly in line with July?s 7.1% and June?s 9%. It does represent a weakening. But it is not a shock departure from this year?s trend of slower industrial expansion than the pervious fiscal. Rather, it is in sync with the RBI?s measures to cool retail offtake, as also with the impact of the rupee?s appreciation on export dependent industries. Even by sectoral analysis, September?s figures are in tune with this year?s sub-trends. The big expansions have been in wood products and basic metal and alloy industries, and both have recorded double-digit rates of growth. Meanwhile, rising interest rates have hit growth in such segments as transport equipment, which includes the automobile sector, and food products. Both these have shrunk. Clearly, consumer products have borne the brunt of the monetary tightening.
Is there reason to worry? For specific segments, yes. But not from the perspective of the overall economy. The latest industrial performance figure is within the tolerance zone of the year?s trend, and the pointers to the future are no cause for alarm. Capital goods production is still going strong. Also, the second instalment of advance corporate tax has revealed a growth of 42%. That is a significant indicator of corporate confidence. Then, there is the growth of bank credit to the industrial sector. Non-food credit is up 23%. This is lower than the rate recorded for the same period of 2006-07, but is a positive figure nonetheless. Instead, it is incremental bank credit to agriculture, services and trade that has been negative in the period spanning April to mid-August 2007. Industrial and personal loans account for the bulk of the Rs 23,000 crore increase in bank credit. Within industry, an estimated half of the credit is headed for infrastructure. Large loans have also gone to textiles, transport equipment, iron & steel, and engineering. The common thread running through these industries is that they are classified as capital and intermediate goods (except textiles). All these may be fragments of data, but they do offer the reassurance that the economy?s investment impulses are still running strong.
