Base effect bolsters industrial output again

India's industrial production expanded at a strong pace in January 2010, thanks largely to a low base effect, data released by the government showed. However, growth in industrial output slowed slightly from the previous month, stoking some worries about future prospects, especially once the fiscal stimulus is withdrawn and interest rates starts to rise. It may be recalled that in January 2009 industrial activity was still reeling under the aftereffects of the global financial crisis.

India's industrial output, as measured by the Index of Industrial Production (IIP), stood at 16.7% in January 2010 as against 1% in the same month a year earlier, the Commerce & Industry Ministry said. The figure was mostly in line with consensus estimates. It remained near the highest reading since April 1995, when the series, which uses 1993-94 as base year, started. Industrial production growth for December was revised up, to 17.6% from a preliminary estimate of 16.8%.

Manufacturing, with an almost 80% weightage in the IIP, stood at 17.9% in January 2010 compared to a 1% in the same month in 2009. The Electricity sub-segment grew by 5.6% in the month under review versus 1.8% in January 2009. Mining output grew by 14.6% in the first month of 2010 as against 0.7% growth achieved in January 2009.

Consumer Durables output expanded by 31.6% in January 2010 compared to 2% in the same month of 2009. Production of Consumer Non-durables shrank by 3.1% as opposed to a growth of 4% in January 2009. Consumer Goods recorded a growth of 4.2% versus 3.6% in January 2009.

Output in the Capital Goods space grew by a whopping 56.2% in January 2010 compared to 15.9% for the same month of 2009. The growth rate in Basic Goods category stood at 10.7% as against a contraction of 0.7% in the year-ago period. Output in Intermediate Goods segments rose by 21.3% in the month under review versus a drop of 7.2% in January 2009.

Between April and January, industrial growth expanded 9.6% compared to 3.3% in the same period last year, the Commerce Ministry said.