Date:18/11/2008 URL: http://www.thehindubusinessline.com/2008/11/18/stories/2008111851571100.htm

Back IIP up but sustainability under cloud

Capital goods, consumer durables help growth.

BL Research Bureau

Numbers released last week showed a mild sequential revival in the Index of Industrial Production (IIP).

It rose by 4.8 per cent in September 2008, compared with 1.3 per cent in August, but was still lower than 7.4 per cent in September 2007.

The sequential increase in IIP numbers has been supported by a better showing from capital goods, which grew by 18.8 per cent, rebounding from 2.3 per cent in August. This is healthy given the high base in September 2007 and needs to be watched for sustainability.

Consumer durables too grew by an impressive 13 per cent, probably due to pre-festive demand.

Future of Revival

However, whether the recovery will continue still remains in doubt, given the downturn registered by other macro-economic parameters.

Recent reports suggest that exports declined by 15 per cent in October — the first contraction since 2003. Domestic car sales slumped by 6.6 per cent last month, as consumers put off their purchases, amid tighter access to finance.

The decline in excise revenues by 8.7 per cent in October also is a pointer to slowing manufacturing growth.

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