New Delhi, Jan 13 (IANS) The attendant worries apart, an element of intrigue crept up from the latest industrial production numbers for November last year released on Tuesday, showing a fall of 3.2 percent month-on-month in India’s factory output from a 9.8-percent growth in October.
From a cursory look at the numbers, it is evident the drag has been caused by the manufacturing sector, which saw its production index drop 4.4 percent in November as against a growth of 10.6 percent in the month before. This apart, capital goods output was down 24.4 percent.
But what is curious is the the spread of 13 percentage points from growth-to-fall in a matter of just one month in an economy that has seen no dramatic developments in the period under review. Experts allude that a host of factors, including the high base effect, have come under play.
“Lower workdays in November due to Diwali, compounded by the Chennai floods, largely explain the steep decline in factory output,” said HSBC Global Research trying to reason out the steep fall. Last year, the festival of lights fell in October.
“Industrial Production (IP) classification by use shows that capital goods contracted sharply and consumer goods also slowed,” the research arm of the global financial power house said.
A look at the data afresh will also show the base effect.
“Though a part of the negative growth in November 2015 is an outcome of higher base, the slowdown is evident across all the broad-based sectors namely mining, manufacturing and electricity,” said Sunil Kumar Sinha, principal economist with India Ratings and Research – a Fitch Group company.
In October last year, the expansion of 9.8 percent came against the backdrop of a 2-7 percent decline in the like month of the previous year. And the decline of 3.2 percent in November came against a growth of 5.7 percent in the year before.
A similar trend was also seen in manufacturing. In October 2015, the growth of 4.7 percent came against a decline of 5.6 percent in the corresponding month of the previous year. In November, the slump of 4.4 percent came after a 10.6 percent growth in the previous November.
Capital goods saw a similar, but a much sharper, trend in terms of growth-decline variation. In the case of consumer durables, although the growth remained intact, the rate of expansion fell from 42.2 percent in October to 12.5 percent in the month before.
“The steep fall in the manufacturing sector growth is because both export and domestic demand, especially the rural demand, have slowed down,” said Harshavardhan Neotia, president of Ficci.
“It also underlines the need for more measures to stimulate investments and deeper reforms.”
There was also the factor of successive growth in recent months.
“The streak of 12 months of consecutive industrial growth also came to end. One month of negative growth should not be interpreted as the end of recovery. However, it certainly shows that ongoing industrial recovery is still fragile and about which Ind-Ra had indicated earlier,” Sinha said.
Devendra Kumar Pant, chief economist of India Ratings, told IANS that industrial production is also influenced by the ground situation each month and a factor of both investments made and consumption.
“Growth in electricity being flat was another major reason for the contraction in the industrial product. A major reason for this divergence in data is due to the fact that industrial production is a ‘dispatches’ data and that it is heavily influenced by seasonality.”