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Industry rebounds to grow 7% in April Growth of industrial output rebounded to 7% in April, after sagging to a low of 3.9% in March (3%, as per the original estimate). Suggesting sustained investment growth, growth of capital goods touched a robust 14.2% in April, continuing its recovery, after having slumped to 2.3% in January, turning in growth rates of 10.4% in February and 11% in March. Capital goods growth in April, however, is still lower than the 16.9% recorded for the last fiscal as a whole. Consumer goods, the problem sector for much of last year, recovered as well, growing 8.9% in April, compared to the growth rate of 5.9% last fiscal. Consumer durables grew 5.5% in April, as against decline of 1% last fiscal. Consumer non-durables grew smartly at 9.8% in April, against 8.3% for the last fiscal as a whole. Data released by the Central Statistical Organisation (CSO) on Thursday shows that the 7% growth of the Index of Industrial Production (IIP) in April is slower than the 11.3% attained in the same period last year, but sharply higher than a revised 3.9% in March. The data for factory output for April suggests that the economy is on the right track, although the six-year low of 3% growth reported for March had heightened worries of a slowdown. “The growth is not far from what could be expected under the circumstances. There is growth in capital goods of 14.2% in April, as against 10.9% a year ago. Consumer non-durables growth has also shown improvement. If we could sustain an industrial output growth of about 7.5-8%, we should be happy,” said prime minister’s economic advisory council member Saumitra Chaudhuri. He said that the interest rate regime could get further tightened till some remission in inflation is seen. “The hike in repo rate was expected in July. It happened earlier. Another round of tightening is possible in September or October. Clearly, the inflation story has only begun, the world over. We may have some degree of monetary tightening till the inflation threat recedes,” said Mr Chaudhuri. He added that despite the power sector witnessing a record capacity addition of 10,700 mw in 2007-08, the target for power generation was low for April, which was surprising. The 7% growth in mining, manufacturing and utilities comes on the back of a strong rebound in consumer durables which grew 5.5% in April than 2.4% a year earlier. Sequentially, this is a turnaround from the negative growth of 1.6% recorded in March. (Negative growth of 1% for 2007-08) The slowdown in this segment had prompted finance minister to promise ‘corrective measures’ in the manufacturing sector while forecasting earlier this month an 8.5% growth for the current fiscal. Auto industry watchers said the Rs 61,000 crore investments committed by major companies will materialise in the next two years, boosting output in the sector and manufacturing as a whole. The manufacturing sector, which has a highest weight in the index of industrial production, grew by 7.5% in April, after growing at 3.9% in March. This, however, is slower than the 12.4% growth recorded in April last year. While mining output grew by 8.6% in April, way above the 2.6% growth in the same period last year and the 4.89% in March, electricity generation grew at a meagre rate of 1.4%, as against 8.7% in the same month last year. Economists pointed out that the target of power generation was very low for the month, which was almost fully met. Economic growth has averaged 8.9% in the last four years, making India the fastest-growing major economy in the world after China. Per-capita income doubled to Rs 24,321 in the year to March 2008 at constant prices, compared with 2001. At current market prices, per capita income topped Rs 33,000 in 2007-08. The government expects 8.5% growth in the current fiscal. Some economists say that the trend in industrial production is emerging as one of moderating growth. “IIP numbers have been witnessing a lot of volatility these days. I don’t think that industrial production will be able to maintain the growth momentum of previous years. The trend that is gradually emerging is one of moderating growth. The second round impact of fuel price hike and the lagged effect of monetary tightening are some factors that are going to weigh down on future IIP numbers,” said Crisil director and principal economist DK Joshi.