Industry growth at 7% for April looks okay only when pitched against the terrible numbers thrown up in recent months. But set against industrial performance over the last three years, 7% signals that the slowdown hasn?t reversed. This is clearer if one disaggregates the IIP. Capital goods seem to be recovering, with the growth rate increasing to 14.2% over the last three months?a jump of 10 percentage points. But consumer goods are in yo-yo mode: growth has fluctuated sharply over the last five months, and these have taken place at levels at least a third lower than peak rates achieved earlier. Basic and intermediate goods, accounting for close to two-thirds of the total industrial output, would seem to be in a low-level equilibrium. Basic goods growth dropped from double digits in August 2007 to a low by the end of the calendar year and have since remained stagnant at sub-5% for almost five months. Intermediate goods have seen a sharp fall in the last three months, with the growth rate halving to 4.2%. Of the 16 major industry segments, output trends are firm only in food & beverages, machinery and transport equipment. Two sectors?leather and chemicals?continue to perform relatively better, posting double-digit growth. Mining has done better, but that?s largely explained by more domestic oil extraction. Crucially, the number of industries where production actually declined has gone up from one to three over the last four months.
What?s the most worrying area? Erratic trends in consumer demand. It still goes against the grain of much of establishment policy thinking to accord consumption the priority it deserves. But consumer demand has been the key accelerator of India?s industrial performance. In April, consumer durables grew at 5%, the highest in the last five months, but awfully modest given recent history. And it seems difficult, looking at recent growth figures for this sector, to make any comfortable prediction of demand picking up. Another stand-out worrying statistic is the growth rate of electricity generation. At 1.4%, it is the lowest in 31 months. With energy prices breaking peak-level records, a slowdown in electricity output is just about the last data one wanted to see. Plus, remember with banks almost certain to raise home, consumer and business loan rates, industry expectations will dampen.