India's Industrial Output Grows 2.4% in November Despite Low Production Index

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's industrial output recorded a growth of 2.4% in November 2008 from the same period in 2007. The positive growth in November is significant as the Index for Industrial Production fell to a 15-year low of negative 0.3% in October 2008. Industrial production for the first eight months of fiscal year 2008-09 was up 3.9% compared to 9.2% for the same period of fiscal year 2007-08, according to the data released by the Central Statistical Organization. This slump in industrial activity has been attributed to the global economic slowdown.

Manufacturing, which contributes to nearly 80% of India's total output, grew by 2.4% in November 2008 over November 2007, after declining by 1.1% a month earlier. Mining rose by 3.2% year on year in November 2008 after witnessing a 0.3% decline the previous month. Electricity generation showed a positive growth of 5.8% and 3.1% in October and November 2008, respectively. Consumer goods grew by 4.4% in November 2008 compared to negative 2.9% a year earlier. Capital goods was the worst affected, recording a steep decline of 2.3% in November 2008 from a positive growth of 24.2% in the previous year.

Crude oil, refined products, coal, electricity, cement and finished steel are the six core industries contributing over 25% to the Index for Industrial Production. Industrial production for these core industries clocked a 2.2% growth in November, compared with 3.1% the previous month. During April-November 2008, rubber, plastic, petroleum and coal products displayed an impressive growth rate of 30.7%, while beverages, tobacco and related products grew by 14.5%, followed by wood, wood products, and fixtures at 8.7%.

Stimulus packages announced by the Indian government to boost the economy and revive industrial production had a positive impact, leading to the growth rebound in November. The central bank reduced interest rates to encourage fresh investments. Though the move was cheered by the industry, analysts feel there is still scope to bridge the gap between the repossession rate and banks' lending rates.

Industry analysts had predicted an annual decline of 1% for November 2008. Economist Anubhuti Sahay projects a dismal growth rate of 2.5% for fiscal year 2008-09 and an average of 3.6% for fiscal year 2009-10, considering weak global economic factors. Economist Sonal Varma forecasts a decline in growth rate for the remaining fiscal year 2008-09. Drops in the demand for manufactured goods and rising inventories are likely to lead to production cuts.

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