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Industry explodes slowdown myth

business Updated: Jun 13, 2007 02:09 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
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Industrial output grew by 13.6 per cent in April, powered by a sizzling 15.1 per cent growth in manufacturing, and belied fears of a deceleration triggered by recent interest rate raises.

Export demand and sustained domestic consumption growth pushed the manufacturing sector, which grew by 14.1 per cent in March 2007.

The electricity sector also grew by a robust 8.7 per cent, up from 7.9 per cent in March, but the mining sector crawled at 3.4 per cent during April as compared with 6.2 per cent in the previous month, figures released by the Central Statistical Organisation (CSO) on Tuesday showed.

The manufacturing sector had grown by 11 per cent in April 2006 and mining and electricity grew by 2.8 per cent and 3.1 per cent, respectively, during the same month in 2006.

The Index of Industrial Production (IIP), which measures overall growth in industry, rose by 13.6 per cent in April this year, as compared with 12.9 per cent March and 9.9 per cent in April 2006.

Analysts and economists said growth in demand, both external and domestic, pushed the manufacturing sector and added that the growth rate might be sustainable in the double digits in the coming months.

Chief economist of Reliance Industries Limited TK Bhaumik said manufacturing accounted for 85 per cent of the country’s total exports. "Exports are growing at above 20 per cent in recent times and this will ensure manufacturing growth at over 12 per cent," he added.

Monetary tightening measures in the last few months did not appear to have had a major bearing on the manufacturing sector. Former Reserve Bank Governor Bimal Jalan said there was not set lag between the time when interest rates are hiked and its impact on industry.

But consumer durables appeared to have been hit by the interest rate rise. Consumer durables grew by 5.3 per cent in April this year compared with 13.3 per cent in March and 7.4 per cent in April 2006. Growth in basic and capital goods also slowed to 8.9 per cent and 19.6 per cent from 9.3 per cent and 17.7 per cent, respectively, in April 2006.