March IIP grows 13.5% on manufacturing

Reacting to the data, finance minister Pranab Mukherjee told reporters here that the industrial growth in March was good enough for the estimated 7.2% GDP growth in the just completed financial year. Planning Commission deputy chairman Montek Singh Ahluwalia said the March IIP data is not going to change the GDP growth estimates for 2009-10. ?We are hoping that during 2010-11, we will close the fiscal with double digit factory output,” he said.

Crisil principal economist D K Joshi underscored that optimism. ?Industrial output growth is likely to stabilise at 9-10% in the current fiscal.”

Commenting on the March numbers, Yes Bank chief economist Shubhada Rao said though the output growth in March was off the peak of 17.7% recorded in December, it still, is a healthy double digit expansion. Government data shows industrial output growth was just 1% at the beginning of last fiscal, but gained momentum by June to scale 11%. It then hovered between 7-12% in the next four months and accelerated further in December to the peak of the year. Output growth then started moderating slowly.

Joshi said as there are no surprises in the latest numbers, there is no message in it for the RBI. He anticipated that the central bank may raise key policy rates gradually by 25 basis points in the coming days. The banking regulator had raised key rates twice since March 19 by a total of 50 basis points citing inflationary pressures in an improving economy.

Joshi said that the economy is expected to have grown at the estimated rate of 7.2% last fiscal. Industrial sector accounts for 27% of the gross domestic output, or the total value of the economy?s output.

Manufacturing, which accounts for four-fifths of industrial output, grew by a robust 14.3% in March against a 0.3% fall in the same month a year ago. In the whole 2008-09 fiscal, manufacturing output shot up 10.9%, compared to 2.8% in the previous year. Power generation growth too improved to 7.7% in March from 6.3% in the same period a year ago.

Indicating that the corporate sector?s confidence in the economy, capital goods production showed an impressive 27.4% in March compared to a decline of 6.3% in the same period a year ago. It recorded a healthy 19.2% expansion in the whole fiscal, compared to a 7.3% growth a year ago. Consumption of consumer durables such as TVs and refrigerators too showed encouraging trend as their production grew by 26.1% in the whole fiscal year, compared to a 4.5% growth in the previous year.

In the meanwhile, commerce and industry minister Anand Sharma said the government will study the moderating trend in industrial output.

“These are minor fluctuations. We will review as to why some slowdown is there and we will go into the reasons and ways of intervention to correct it,” the minister said. The sectors which witnessed negative growth include jute, textile products and wool, silk and man-made fibre textile.