Home > Macro economics > IIP growth recedes

IIP growth recedes

Industrial growth nosedived to a 20-month low of 1.6% in December 2010. This was mainly due to a contraction in capital goods, consumer non-durables and manufacturing sector as a whole.

The deceleration came in spite of a 6.6% growth in production of core infrastructure industries — which account for 26% in the IIP. The 6.6% growth came over and above 6.2% rise in December 2009.

Imports in India dipped by 11% in December. This, some assume could be partly due to lower import of capital goods, as well as lower demand for raw materials and spare parts from a slowing down industrial production, though detailed import data break-up is not yet available.

Fresh order inflow by L&T declined by 25% to Rs 13,366 crore during October-December 2010 compared to the year-ago period. The company has an order book position of  Rs1,14,882 crore.

Besides the base effect, order inflows were impacted mainly due to the delays in tendering processes, environmental approvals, land acquisitions and political issues. And with a significant amount of infrastructural orders coming up for bidding during the March 2011 quarter, new order inflows are expected to rise.

Rising interest cost may also be beginning to take its toll on investment announcements and consequently on order placement.

Despite low year-on-year growth in November and December 2010, industrial production expansion during the April-December, 2010 stood at 8.6%. The government has estimated economic growth for the current financial year at 8.6%, against 8% a year ago.

 Year-on-Year Growth across Use-based Segments of IIP
  Apr May June July Aug Sep Oct Nov  Dec
IIP 16.6 12.2 7.2 15.1 7.3 4.9 11.3 3.6 1.6
Basic Goods 9.1 8.2 3.3 5.2 4.2 4.7 8.8 6.4 5.2
Capital Goods 64.1 37.2 7.5 65.0 2.5 -3.6 21.5 12.8 -13.7
Intermediate Goods 10.8 11.0 9.7 9.8 11.3 11.2 10.6 2.3 6.6
Consumer Goods 11.9 7.2 8.6 7.3 9.0 4.7 9.6 -2.0 3.9
Durables 32.1 23.7 26.5 22.5 27.1 10.8 30.9 4.4 18.5
Non-Durables 4.8 1.0 2.0 1.1 1.5 1.9 0.1 -4.6 -1.1
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Categories: Macro economics
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