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Economy in Brief

Broad Industrial Production Advance in India
by Carol Stone January 12, 2007

Industrial production in India was strong again in November, extending a long but irregular uptrend in the industrial sector of that rapidly emerging economy. According to the Central Statistical Organization, IP was up 5.5% in the month and 14.4% on the year. The CSO data are not seasonally adjusted. The month-to-month comparison quoted here is taken from seasonal adjustment performed by Haver Analytics. Because the month-to-month movements are very erratic, our discussion below covers yearly growth trends both in the latest month and over a longer period.

Marked acceleration of even heavy industry is evident in the categorical breakdown. Basic metals and alloys surged by 25.4% over November 2005, a third consecutive month of 20%-plus yearly gains. Machinery excluding transport equipment expanded 17.3% in November and the last six months have run 14.9% ahead of the comparable year-ago period. Nonmetallic mineral products have a similar pattern, with November up 17.7% and the last six months up 13.8% on the year-ago period.

Among "softer" products, rubber, plastics and petroleum expanded 23.2% in November and 13.1% in the six-month period. This follows a particularly weak performance over the prior five years. Cotton textiles, the kind of manufacturing often associated with India, had experienced a long period of little or no growth, but has lately staged a comeback. By November 2006, production here was up 18.3% from November 2005 and the six months are up 13.5% from the same time in 2005.

The service sector in India remains far larger than manufacturing, measured by gross value added. But these gains in industrial production show a significant diversification of the Indian economy. While every nation need not be a major player in world metals markets or motor vehicles, the breadth of recent gains -- especially the return of strength in textiles -- gives a firmer foundation for further development.

India (NSA, yr/yr % changes) Nov 2006 Oct 2006 Sept 2006 2005 2004 2003
General Industrial Production
(SA, FY93=100)
250.9 237.9 245.5 216.7 200.8 185.2
  Mo/Mo % Chg, SA 5.5 -3.1 1.9 -- -- --
  Yr/Yr % Chg, NSA 14.4 4.4 11.4 7.9 8.5 6.6
Manufacturing 15.7 3.8 12.0 9.0 8.9 7.1
Cotton Textiles 18.3 9.7 14.7 9.1 7.4 -5.3
Rubber, Plastic, Petroleum 23.2 7.7 15.7 3.9 1.2 7.2
Basic Metals & Alloys 25.4 20.9 20.0 13.8 4.3 10.9
Machinery ex Transport 17.3 2.1 14.2 11.5 24.3 8.3
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