Deceptively small

Quick estimates of the index of industrial production ( IIP) for January — over the like period last year — show 3.7% growth. But there’s no need to rush to (dire) conclusions. The fact is that industrial output last January was on a strong wicket, posting 16.8% growth.

So, the latest increase is on a very high base, and the overall average for this and previous January works out in the reasonable double-digits . It is not to quibble about, and not remarkable either. Also, the latest figures show that the output of manufactures, which has almost 80% weightage in the IIP, has grown just 3.3% year-onyear . But again, the latest growth is on top of the 17.9% rise; so the high base needs to be taken into account. Further , there seems real turnaround in electricity offtake (which has over 10% weightage in the index), with growth put at a buoyant 10.5% y-o-y . But too much need not be made of a month’s data; anyway in the absence of distribution reforms, higher offtake would further exacerbate utility losses.

Disaggregated figures show that capital goods output for January has declined by 18.6% y-o-y . The seeming decrease is on a huge 57.9% rise last January, which needs to be noted. Besides, capital goods now increasingly consist of relatively long-gestation items like power boilers and turbines; so it makes better sense to track quarterly figures for a truer picture. And for April-January this year, growth in capital goods — which denotes investment demand , going forward — is put at a credible 12.3%, and over and above the 16.1% rise in the same period last fiscal. It suggests growing investment demand y-o-y.

Further disaggregated data shows that the output of machinery and equipment (nearly 10% weightage) has grown 10.8% during Apirl-January . And in the like period, growth in transport equipment and parts — which denotes production in the auto sector — has been a fast-paced 21.7%. The January data also shows solid growth across both non-durables and durables, with the composite increase for consumer goods (weightage almost 29%) put at 11.3%. Once the IIP is revised from its current 1993-94 base, it will yield a picture that is a whole lot more realistic.