Industrial growth slows down to 5.4% in June

Industrial growth slows down to 5.4% in June
Investors book profit ahead of P-notes meet
Market tanks on false alarm over IIP

A slowdown in the manufacturing sector pulled down India's industrial growth in June to 5.4 per cent from 8.9 per cent a year ago, but consumer sector nursed its way back to health growing 10 per cent. Growth in manufacturing sector, which accounts for over two-third of the Index of Industrial Production, fell drastically to 5.9 per cent from 9.7 per cent a year ago. Manufacturing exhibited a similar trend in the first quarter as well, growing by a poor 5.6 per cent compared with 11.1 per cent last year.

The only silver lining was that consumer durables growth gathered momentum in June registering a growth of 3.5 per cent against a negative growth of 3.6 per cent last year, pushing up the overall consumer sector growth to 10 per cent. Electricity sector growth fell to 2.6 per cent against 6.8 per cent a year ago, while mining sector bounced back to post 2.9 per cent growth compared with 1.5 per cent.

Industrial growth almost halved to 5.2 per cent in the first quarter of 2008-09 from 10.3 per cent a year ago. Even though industrial growth slowed down in June year-on- year, the pace was much less in the earlier two months of this fiscal compared to a year ago. According to revised figures, IIP grew by 4.19 per cent in May against 10.6 per cent a year ago and 6.2 per cent in April against 11.3 per cent in the first month of 2007-08.

For the quarter under review, electricity growth slowed down to two per cent against 8.3 per cent, but mining growth was up by 4.7 per cent against 2.7 per cent. Consumer goods sector, which bore the brunt of rising interest rates, showed revival with durables segment coming out from negative growth in June and also the first quarter. In the first quarter, consumer durables grew by 3.8 per cent against -0.7 per cent.

Consumer non-durables segment growth was up by a whopping 12.2 per cent in June against 6.3 per cent a year ago. However, for the first quarter, the growth in consumer non-durables was 10.1 per cent against 12.4 per cent because of less growth in April and May. Overall consumer goods sector grew by 8.5 per cent in the first quarter from nine per cent a year ago.

However capital goods production, which is crucial for future industrial production, grew by just 5.6 per cent in June against 23.1 per cent a year ago. Intermediate goods growth was 2.9 per cent in June against 8.6 per cent and basic goods 2.9 per cent from 9.2 per cent. In terms of industries, ten out of 17 industry groups have shown positive growth in June. The industry group Beverages, Tobacco and Related Products have shown the highest growth of 22.3 per cent, followed by 12.6 per cent in Transport Equipment and Parts and 11.5 per cent in Basic Chemicals and Chemical Products.

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Mkts fall 291 pts

Investors overlooked June IIP data and declining crude oil prices to book profit on Tuesday, bringing an end to five-day rally. They were also cautious ahead of SEBI meet on participatory notes Wednesday, marketmen said. India's industrial output grew by 5.4 per cent in June compared with a growth of 8.9 per cent a year ago. However, the growth was in line with market expectation of 5 per cent. Manufacturing sector, which accounts for over two-third of the Index of Industrial Production, grew by 5.9 per cent against 9.7 per cent a year ago.

“IIP numbers for June were in line with expectations. The growth has definitely slowed compared to last year. Though this moderation raises some concerns on the overall growth, we do not see the situation worsening. The moderation in IIP is due to previous tightening by RBI. Inflation being the key priority, both RBI and the finance ministry have traded growth for containing inflation,” said Krupesh Thakkar of India Capital Markets.

Bombay Stock Exchange’s Sensex closed at 15,212.13, down 291.79 points or 1.88 per cent. The index touched a high of 15579.78 and low of 15124.91 during the day. National Stock Exchange’s Nifty ended at 4555.50, down 1.40 per cent or 65 points. It touched an intra-day high of 4649.85 and low of 4525.75.

“Rally in the market for the last three weeks has been sentiment based, which took benchmarks up by 24 per cent. We are still in a bear market and it was right time to book profits. IIP figures have disappointed to some extent,” said Vinod Nair, deputy head of research at Religare Securities.

Source: ET