Search the Internet          Tips  Sites: Finance, Investment

Industrial output slowdown continues; down at 1.9% in May

Industrial production continues to drift downward registering a growth of just 1.9 per cent during May, 2001, compared to 6 per cent growth in May last year.

According to quick estimates of Index of Industrial Production released by the Central Statistical Organisation, the cumulative growth during first two months of 2001-02 was significantly lower at 2.6 per cent as against an impressive growth rate of 6.2 per cent in the corresponding period last year.

The manufacturing sector, with an over two-third weightage in the IIP, continued to be the major cause for an overall slump in the industrial growth. It grew by lowly 1.6 per cent during May, 2001, as against 6.2 per cent in May, 2000.

During April-May manufacturing sector grew at 2.6 per cent as against 6.6 per cent.

The electricity sector, which had posted a growth rate of 6.4 per cent in May last year witnessed a low growth rate of 2.8 per cent in the same month this year, while the cumulative growth in this sector for April-May 2001 was at 2.2 per cent as against 5.1 per cent last year.

The mining sector reflected further improvement by growing at 4.1 per cent in May this year compared to 2.6 per cent growth in the same month last year. The trend is also visible in the cumulative growth at 3.8 per cent in April-May 2001 as against 3.3 per cent in 2000.

Reuters adds: Following are analysts' views on data released by the Indian government on Thursday showing that industrial output grew 1.9 per cent year on year in May, compared to 6.0 per cent growth in the same month last year:

Riyaz Khan, chief of macro-economics at Centre for Monitoring Indian Economy: "The slowdown, which was expected, has been largely due to the lack of demand, a result of two years of decline in agriculture."

"Lack of private investment and higher imports of consumer goods have also contributed to the lower growth numbers. Agriculture should see a growth of nine percent this year, and this is likely to lift demand in the second half of the year.

"Adequate rains in the August-September period, the harvest time, will be critical since it will impact overall agricultural output.

"For the full year, we could we expect IIP growth of 4.5 per cent."

Kirit Parikh, director, Indira Gandhi Institute of Development and Research: "The data is quite depressing.

"To some extent there will be a turnaround, helped by good monsoon rains."

"We have had two years of patchy monsoons which restrained demand. This year's good monsoon should revive both consumer and industrial demand. Having said that, there are measures that are not beyond policy. The government needs to restructure its expenditure into productive areas like infrastructure and curtail subsidies."

M R Madhavan, vice-president, Bank of America: "It is as bad as expected."

"The advance data for the infrastructure sector had shown a decline of 0.5 per cent in May and this had given some warning that the index of industrial production numbers would be below 2 per cent for May.

"Going forward, industrial production is likely to remain sluggish this year, even if agricultural growth picks up sharply as some forecasts show.

"The impact of this on the manufacturing sector would take at least take a year's time. I am expecting manufacturing sector growth for 2001-02 to be near four percent compared to the previous year's 5 per cent."

Pradeep Srivastava, chief economist, National Council for Applied Economic Research: "There's nothing new in the numbers."

"The slowdown started in the second half of last year, and these numbers show that is continuing. The outlook remains sombre."

Tell us what you think of this report