09 Sep 2008 4:22 PM

Industry to grow by 9.1% in 2008-09: CMIE

Growth in the index of industrial production (IIP) slumped to 5.2 per cent during April-June 2008. These poor IIP growth numbers rolled out by the ministry of statistics & programme have led to fears of a slowdown in the industrial activity. However, we believe that the current IIP figures are gross under-estimates and do not capture the trend in the industrial growth correctly.

The IIP numbers do not confirm to the trends in the alternate reliable data sources. Financials of 2,144 listed manufacturing companies show a 22.6 per cent rise in real sales during April-June 2008, which is substantially higher than the IIP growth for the quarter. Other indicators like growth in industrial credit disbursement by banks, private final consumption expenditure, transportation activity and flow of fresh capital investments also show a healthy trend, ruling out the possibility of an industrial slowdown.

We expect the industrial production to grow by 9.1 per cent in 2008-09. This projection is based on the detailed analysis of projected capacity and expected capacity utilisation of major individual industries. The sectors which would be driving the industrial growth in 2008-09 are - machinery (18 per cent), chemicals (14.5 per cent), basic metal (12.4 per cent), rubber, plastic & petroleum products (11.8 per cent) and transport equipments (11 per cent).

We fear that if the data collection problems of the IIP are not fixed soon then the year 2008-09 is more likely to see the official index (the uncorrected IIP) grow by a mere 8.4 per cent, which would be considerably lower than the actual industrial growth. Hence, we believe that there is a need to re-establish the credibility of the IIP at the earliest to enable meaningful analysis.

Sonal Bhatia
bsonal@cmie.com