Strong Nov trade data allays fears of industry slowdown
The industrial sector is not hitting the slow down mode just yet. The slowdown in industrial output in October, when the Index of Industrial Production slipped to 6.2 % was an exception.
By Subhomoy Bhattacharjee, TNN |
NEW DELHI: The industrial sector is not hitting the slow down mode just yet. The slowdown in industrial output in October, when the Index of Industrial Production slipped to 6.2 % was an exception.
Government officials sitting down to the budget calculations can instead take heart from related data, that shows the sector would possibly turn in a much better performance in November. The trend growth rate of IIP for the April-October, 2006, is 10.3%.
The latest merchandise trade figures for November, released last week show a 34% year on year growth. There has also been a 40% rise in non-oil imports. This shows that the domestic industrial sector is growing at a fast clip. The demand for non-oil imports arises basically from the industrial sector, whose demand for raw materials makes up most of this category.
According to Saugata Bhattacharya, chief economist, UTI Bank, the numbers indicate that industrial output growth will have bounced back in November. Dr Pronab Sen , principal adviser in the Planning Commission, the November IIP figures, could show a rise that will be sharper than the trend rate of growth. In November last year, the IIP index had slipped to 214.8, from 223.9 in October.
The continued upswing is also visible in other indicators. The demand for non food credit has risen by 30.7% year on year, till the end of first week of December. In absolute terms it has risen by Rs 241 billion. The third installment of advance direct tax also shows the same trend, climbing by 44% over last year.
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Here too the demand for non-food credit emerges largely from the industrial sector. While the services sector makes up about 60% of the Indian economy, the demand for credit is far more in the manufacturing sector. The robust rise in non-food credit also shows that the industrial sector is purring along comfortably. subhomoy.bhattacharjee@timesgroup.com
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