Global| Jul 12 2007India's Industrial Production Up "Only" 11.1% in May
Summary
Industrial output in India has accelerated markedly over the last couple of years. In the data for May, published today in Mumbai by the Central Statistical Organization, the gain was 11.1% from May 2006 and that actually disappointed [...]
Industrial output in India has accelerated markedly over the last couple of years. In the data for May, published today in Mumbai by the Central Statistical Organization, the gain was 11.1% from May 2006 and that actually disappointed some analysts, who had hoped for a repeat of April's 12.4% year-to-year growth.
This is a sustained period of good growth, but India has seen prior periods of rapid expansion: the late 1980s and the mid-1990s are seen in the first graph here, which takes a long view. Since India has been known for its rapid growth as a center for the service sector, we compare growth in manufacturing to that in gross value added in trade, hotels and communications. We see in the second graph that sector did surpass manufacturing production growth from 2001 to 2004, but manufacturing has picked up considerably since early 2006 as services simply maintained their pace.
Big increases in India's industry have come in the metal products and machinery industries, and in the classification of goods by end use, it is capital goods that have shown by far the most growth. Because monthly activity is subject to wide swings, we judged recent comparative performance by calculating 6-month moving averages and taking the year-to-year growth in those. By that measure in May, capital goods output has risen 19.3%, while intermediate materials are up 12.5% and consumer goods by 11.2%. By industry, other outsized gains have taken place in plastics and petroleum refining, food, textiles and wood products.
Heavy industry has thus become increasingly important in India. We find this somewhat surprising; as we noted here last week for Germany, we often have the impression that China and other East Asian countries have all the growth in these sectors. But in fact there seems to be enough high tech heavy equipment demand to go around and construction projects in many places, especially right there in India, which require heavy metal forms and parts. So unlike the analysts and reporters who noticed a slight downtick in total production growth in May, we'd see instead the continuation of very rapid pace.
| INDIA Industrial Production | May 2007 | Apr 2007 | Mar 2007 | Calendar Year Averages||||
|---|---|---|---|---|---|---|---|
| 2006 | 2005 | 2004 | 2000- 2003 | ||||
| Total Index, NSA, FY93/94=100 | 264.2 | 253.1 | 288.5 | 239.6 | 216.7 | 200.8 | -- |
| Mo/Mo % Change, SA | 1.9 | -1.0 | 5.8 | -- | -- | -- | -- |
| Yr/Yr % Change, NSA | 11.1 | 12.4 | 14.5 | 10.5 | 7.9 | 8.5 | 5.0 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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