Industrial production grew at a five-month low of 2.1 per cent in March even as both manufacturing activity and capital goods’ offtake improved during the month.
The factory output, as measured by the Index of Industrial Production (IIP), had contracted by 0.5 per cent in March 2014.
For 2014-15 fiscal, industrial production grew at 2.8 per cent as against contraction of 0.1 per cent in 2013-14, the data released by the Central Statistics Office today showed.
Meanwhile, the IIP for February has been revised downwards to 4.86 per cent per cent from the provisional estimate of 5 per cent released last month.
The IIP had grown at 2.77 per cent in January, 3.56 per cent in December and 5.2 per cent in November. The factory output contracted by 2.7 per cent in October.
Manufacturing output, which constitutes over 75 per cent of the index, grew by 2.2 per cent in March against a contraction of 1.3 per cent in the same month a year ago.
The production of capital goods, a barometer of demand, grew by 7.6 per cent in March as against a contraction of 11.5 per cent in same month of last year.
Mining sector grew by 0.9 per cent in March 2015 against 0.5 per cent expansion in the same month last year.
Overall, 13 out of 22 industry groups in the manufacturing sector showed positive growth during the month of March.
For whole 2014-15, the manufacturing sector expanded by 2.3 per cent, against a contraction of 0.8 per cent in 2013-14. Capital goods output grew by 6.2 per cent in last fiscal as against a dip of 3.6 per cent in 2013-14.
Mining output rose by 1.4 per cent last fiscal against a contraction of 0.6 per cent in 2013-14.
Power generation grew by 2 per cent in March against 5.4 per cent in the same month last year. During 2014-15, power generation grew at 8.4 per cent compared to a growth of 6.1 per cent in previous fiscal.
The overall consumer goods output contracted 0.7 per cent in March compared to a dip of 2.2 per cent in the same month last year. The output was also contracted by 3.5 per in the entire 2014-15 fiscal compared to a decline in production by 2.8 per cent in the same month last year.
The consumer non-durable production grew by 1.9 per cent in March compared to a growth of 5 per cent in same month last year. During 2014-15, the segment grew by 2.8 per cent compared to a growth of 4.8 per cent in previous fiscal.
Consumer durable goods output declined by 4.7 per cent in March compared to a contraction of 11.8 per cent in same month a year ago. During 2014-15, the segment’s output dipped by 12.5 per cent compared to a contraction of 12.3 per cent in previous fiscal.
However the basic goods grew by 2.3 per cent in March compared to 4.6 per cent growth in same month last year.
During 2014-15 the output grew by 6.9 per cent compared to 2.1 per cent in previous fiscal.
The production of intermediate goods grew by 1.9 per cent in March compared to a growth of 1.3 per cent in same month a year ago. During 2014-15, the output of these goods grew by 1.6 per cent compared to a growth of 3.1 per cent in 2013-14.
Below are comments from analysts on the data:
RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL SERVICES, MUMBAI
“Both the industrial production growth and CPI inflation numbers are showing a huge disconnect from the leading indicators.
“Food price data from the Ministry of Consumer Affairs shows a sequential increase in prices of cereals, sugar, milk, edible oils, etc. But somehow this is not reflected in the actual retail inflation.
“A sharp decline in core inflation and favourable base have contributed to CPI moderation. One thing is for sure: growth has weakened considerably and the government somehow has to find out radical measures to move investment sentiment.”
ASHISH VAIDYA, HEAD OF TRADING, ASSET LIABILITY MANAGEMENT, DBS, MUMBAI
“With inflation coming lower and IIP (industrial output) also a little low, chances of rate cut in June have increased.
“The fears of pre-monsoon showers on food inflation is not coming through as food supply has been managed quite well.
“The fact that there is hardly any credit growth and both inflation and IIP are benign make a case for cutting rates. Markets will move in a 3-5 basis points range this week but going ahead to June sentiment will turn positive on expectations of a rate cut.”
KILLOL PANDYA, SENIOR FUND MANAGER, LIC NOMURA MF ASSET MANAGEMENT, MUMBAI
“The inflation number is welcome. We wanted to see the continuation of softening of inflation. That is the only good thing going for bond markets.
“We can expect a rate cut sometime in June. If RBI wants to lower rates before inflation catches up due to monsoon-related risks then June is the time.”
R. SIVAKUMAR, HEAD OF FIXED INCOME FOR AXIS ASSET MANAGEMENT, MUMBAI
“The larger message is the trend of falling inflation would continue.
“Bond yields are unlikely to react. The reason for RBI’s pause after two rate cuts this year is a possible hike in rates by U.S. Federal Reserve.”