Industry concern over meagre factory output rise

Last Updated: Fri, Mar 11, 2011 12:20 hrs

New Delhi, March 11 (IANS) India's factory output continued to grow at below-expected level, expanding just 3.7 percent in January compared to 2.53 percent during the month before and 16.8 percent in the like month of last fiscal, official data showed Friday.

The drag was mainly on account of a mere 3.3 percent growth in manufacturing, which has a weight of nearly 80 percent in the general index for industrial production and 1.6 percent in mining, which has been assigned a weight of 10.47 percent.

Electricity sector grew 10.5 percent against 5.6 percent in January 2010.

Data released by the Central Statistical Organisation (CSO) further revealed that the capital goods sector actually logged a decline of 18.6 percent against a 57.9 percent growth during the corresponding month of last fiscal.

In contrast, the consumer durables sector performed best with a growth of 23.3 percent, even though the growth was slightly lower than that recorded during January 2010, which was placed at 28.2 percent.

Cumulatively, the factory output has expanded by 8.3 percent in the first 10 months of this fiscal, against 9.5 percent in the corresponding 10 months of the previous fiscal.

'In terms of industries, 14 out of 17 industry groups have shown positive growth during the month of January 2011 as compared to the corresponding month of the previous year,' the organisation said in a statement.

'Though capital goods are showing negative growth, there are other important items, which are showing highly positive growth.'

Reacting to the numbers, the Confederation of Indian Industry (CII) said the performance was a matter of concern as the growth was uneven across sectors.

'In particular, the continued decline in capital goods is a concern as this indicates some slowdown in investment demand as well as capacity constraints in the production of capital goods,' the industry lobby said in a statement.

'On the other hand, the recovery in consumer non-durables in this month's data is a welcome sign that consumer budgets are easing,' CII director general Chandrajit Banerjee said in a statement.

The Federation of Indian Chamber of Commerce and Industry had a similar comment.

'It is reported that in the case of some commercial banks upto 90% of their credit off take since July 2010 has been by non-core manufacturing sectors and pre-dominantly for infrastructure,' the chamber said.

'This perhaps reflects that manufacturing capacity expansion may not be feasible in the light of rising cost of borrowing and increased competition within domestic market from imports.'

The Associated Chambers of Commerce and Industry asked for caution from the government and the central bank.

'Till hyper inflation conditions are reversed and normalcy is restored in the developed economies, policy makers need to show more caution about the robustness of industrial recovery.'

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