By IANS,
New Delhi : India’s industrial growth was a mere 5.4 percent in June 2008 down from 8.9 percent in the same month last year in terms of the Index for Industrial Production (IIP).
The IIP grew by only 5.2 during April-June 2008 compared to 10.3 percent for the corresponding period last year, according to data released here Tuesday by the Central Statistical Organisation (CSO) of the statistics and programme implementation (S&PI) ministry of the central government.
This is in sharp contrast to projections that industrial growth will be over 8 percent in Asia’s third largest economy and till recently considered to be one of the fastest growing economies in the world.
The IIP grew a mere 3.8 percent in May this year. The June data, therefore, shows that there has been a welcome improvement, but the growth rate is still far short of what the government, and, especially Finance Minister P. Chidambaram, has been claiming the country will record in the current fiscal.
The finance minister had recently indicated that although the country had achieved an average of around 9 percent growth during the last four years, this was a difficult year due to rising crude and commodity prices. He expected the growth rate to moderate to around 8 percent.
For the overall economy to grow at around 8 percent, industrial growth must be around 10 percent or more to offset the much slower growth in agriculture. In most normal years, agriculture growth is never more than about 4 percent.
The continuing slowdown in industrial growth coincides with an upward trend in prices that the country has been witnessing for over a year. India’s annual inflation for the week ended July 26 soared to 12.01 percent.
In June, mining, manufacturing and electricity sectors grew respectively 2.9 percent, 5.9 percent and 2.6 percent.
Save for the mining sector, which grew 1.5 percent in June last fiscal, the other two sectors showed a sharp drop in growth rate.
Planning Commission Deputy chairman Montek Singh Ahluwalia was quick to admit that there was need to speed up the industrial growth rate if the economy had to register an overall 8 percent growth rate.
“I do agree that the growth in industrial sector is rather slow. We need to improve it to maintain the growth momentum of eight percent or above,” Ahluwalia told IANS.
According to the official data, the mining sector registered a 4.7 percent growth rate during April-June in the current fiscal against 2.7 percent in the last fiscal, while the manufacturing sector logged only 5.6 percent growth as compared to 11.1 percent in the same period last year.
The electricity sector also showed a declining growth trend by logging only two percent growth in April-June in the current fiscal against 8.3 percent in the last corresponding period.
Ahluwalia said: “There is no doubt that the economy will be slower this year than it was last year”.
At the same time, he said it was still possible for the economy to grow at around eight percent in the current fiscal.
According to Ahluwalia, the industrial production growth rate of 5.4 percent in June should not be taken as a setback to the economy.
“One month’s industrial growth rate cannot and should not be taken as an indicator of the final growth rate in the current fiscal,” he said.
Industry lobbies, however, felt that things would improve later during the year.
“The industrial growth is showing a recovery trend. It is a good thing. There is a need to maintain the trend,” Anjan Roy, economic advisor, Federation of Indian Chambers of Commerce and Industry (Ficci), an industry lobby, told IANS.
He said that if the economy managed to grow at a rate of around 8 percent in the current fiscal, it would not be a small achievement given the recession in the global market, and high prices of crude oil.
“Indian economy will certainly bounce back in coming months. What is being witnessed today is just a momentary phase,” Roy claimed.