Negative growth of 1.9% comes as a disappointment: CARE

In March it looks very unlikely that there will be positive growth as the base year effect is quite sharp.

April 15, 2014 10:39 IST | India Infoline News Service
After registering a positive growth in the month of January 2014, Index of Industrial production (IIP) for the month of February 2014 registered a negative growth of 1.9% as against a growth of 0.6% in February last year. Negative growth is mainly on account of weak performance by the manufacturing sector. This was against a positive growth rate expected by CARE Ratings based on growth of 4.6% in the core industry sector for February.
The weak performance in Industrial output continues to prevail mainly due to the declining consumer demand partly on account of high inflation and absence of sufficient investment due to prevailing high interest rates and prevalence of surplus capacity. Also there has been very limited movement in the infrastructure space. Cumulative growth in April-February FY14 stood at -0.1% as against positive
growth of 0.9% in the corresponding period of the previous year.
Mining continues to register negative growth of -1.1% in April–February FY14, as against -2.3% during the same period last year.
Growth in manufacturing stood at negative 0.7 % in April –February FY14 when compared with a growth of 1.0% in the same period last year.
Eleven industries registered a negative growth in April–February FY14 which included Radio, TV and communication equipment (-26.8%), Office accounting & computing machinery (-14.1%), Furniture manufacturing (-14.0%), Motor vehicles, trailers & semi–trailers (-9.1%), Fabricated metal products except machinery & equipment (-7.0%), Machinery and equipment (-5.5%) among others Positive growth was registered by eleven industries which included Wearing apparels, dressing & dyeing of fur (22.1%), Electrical machinery & apparatus (17.0%), Chemical & chemical products (9.5%), Other transport equipment (5.9%), Coke, refined petroleum products & nuclear fuel (5.5%) among others.
Electricity provided some boost, registering a growth of 6.2%.

Core Industries Performance

Core industries that have a weight of 38% in the total IIP are representative of what is happening in the infrastructure space. Core Industries recorded a positive growth for the fourth straight month at 4.5 % in February 2014, which is higher than the 1.3% growth recorded in the corresponding period last fiscal. However, the cumulative output growth of the eight core sector lowered to 2.6% (April- Feb FY14), when compared with 6.4% (April-Feb FY13).
The core industry growth during February 2014 was mainly on account of double digit growth of electricity sector (10.5%), steel growing at 4.8% and petro refinery growth at 3.2%. However, negative growth was witnessed in natural gas (-4.4%) and fertilizers (-0.7%).
Negative growth of 1.9% comes as a disappointment after a positive growth in the previous month. Negative growth of consumer goods is indicative of no turn around in the consumer spending. Weak domestic demand, high raw material cost on account of high inflation, high interest rate and low business sentiment has resulted in
weak industrial activity. Hence, the biggest challenge is to revive manufacturing for overall growth to pick up.
In March it looks very unlikely that there will be positive growth as the base year effect is quite sharp. With a peak index in March 2013, m-o-m growth in March 2014 has to be 12.4% for zero growth which looks unlikely.
Therefore, overall manufacturing and industrial growth will be negative in March as also for the entire year.

FREE Benefits Worth 5,000



Open Demat Account
  • 0

    Per Order for ETF & Mutual Funds Brokerage

  • 20

    Per Order for Delivery, Intraday, F&O, Currency & Commodity