Capital goods push IIP growth to 13.8%

Belying fears of a slowdown, industrial growth accelerated to 13.8 per cent in July from 7.2 per cent in the corresponding month last year, on the back of a 63 per cent jump in capital goods production.

Among the main industry segments, manufacturing activity expanded by 15 per cent from 7.4 per cent a year ago. Mining sector grew by 9.7 per cent from 8.7 per cent while electricity generation growth slowed down to 3.7 per cent when compared to previous 4.2 per cent growth.

Capital goods and consumer durable goods production expanded by 63 per cent (rpt) 63 per cent and 22.1 per cent respectively.

Experts earlier had predicted the industry growth in single-digit number for the month of July because of the base effect.

The double-digit growth in July is commendable because industrial expansion in the previous month was revised down to 5.67 per cent from the earlier estimates of 7.1 per cent.

Industrial growth for the first four months of this fiscal stood at 11.4 per cent from 4.7 per cent a year ago.

Renowned economist Rajiv Kumar said: "It is too early to revise the GDP figures upwards. I expect a slowdown in industrial activity in the coming months."

Economy grew by 8.8 per cent in the first quarter of this financial year.

In terms of specific industries, 12 out of 17 groups showed positive growth in July. The industry group - Machinery and Equipment other than Transport equipment - has shown the highest growth of 49.9 per cent, followed by 31.1 per cent for other manufacturing industries and 24.9 per cent for transport equipment and parts.

On the other hand, wood and wood products showed negative figures at 9.4 per cent, followed by 2.1 per cent in beverages, tobacco and related products.

The robust growth of 63 per cent in capital goods augur well for future industrial production. However, if demand does not increase proportionately, it might create only inventories, analysts said.

It was mainly industry and services which had borne the brunt of the global financial meltdown during 2008-09. This prompted the government to provide stimulus by cutting duties and increasing public expenditure.

However, despite the government partially withdrawing the stimulus ths financial year - by increasing excise duty by 2 per cent, to 10 per cent - the positve growth in various sectors left analysts surprised.